1980 (2) TMI 110 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 12,000 on account of sale of movie equipment treated as income from other sources.
2. Dispute regarding the agreement made by the assessee admitting the sum of Rs. 12,000 as income.
3. Assessment of capital gains on the sale of movie equipment by the assessee.

Analysis:

1. The primary issue in this case revolved around the addition of Rs. 12,000 by the Income Tax Officer (ITO) on account of the sale of movie equipment, which was treated as income from other sources. The assessee, engaged in the business of optician and manufacturing eye-drops, explained that the amount came from the sale of movie equipment and gifts received. The ITO, however, found no positive evidence for the sale of movie equipment and the assessee agreed to add back the amount as income. The matter was appealed before the Appellate Assistant Commissioner (AAC) and subsequently reached the Tribunal.

2. The Tribunal, in a previous judgment, observed that the assessee denied making any agreement admitting the sum of Rs. 12,000 as income. The Tribunal directed the issue to be considered on merits and sent back the appeal to the AAC for further review. The AAC, in the subsequent order, accepted the assessee's contentions that the movie equipment was purchased and sold, resulting in a capital gains amount of Rs. 4,000, which was exempt from taxation due to the holding period exceeding 60 months.

3. The Revenue challenged the AAC's order, alleging that the issue was not decided on merits and the ITO was not given an opportunity to be heard. However, the counsel for the assessee argued that the AAC considered all evidence on merits and the Revenue failed to present any evidence to contradict the findings. The Tribunal upheld the AAC's decision, noting that there was a reasonable nexus between the sale of the camera and the cash credit in the capital account, justifying the deletion of the addition. Consequently, the appeal by the Revenue was dismissed, affirming the AAC's order.

In conclusion, the Tribunal upheld the AAC's decision to delete the addition of Rs. 12,000 on account of the sale of movie equipment, as the evidence presented by the assessee established a clear connection between the sale and the cash credit in the capital account, warranting the exemption from taxation on the capital gains.