1981 (6) TMI 56 - AT - Income Tax

Summary

Issues:
- Addition of Rs. 25,000 to the total income of the assessee for the assessment year 1975-76.
- Rejection of explanation by the ITO regarding bills and vouchers found on the premises of the assessee.
- Discrepancies in the findings of the ITO and AAC regarding the business of M/s. Promod Hosiery.
- Application of Section 69 of the IT Act by the ITO in making the addition.

Analysis:
The appeal was filed against the order of the AAC confirming the addition of Rs. 25,000 to the total income of the assessee for the assessment year 1975-76. The ITO had made this addition based on bills and vouchers found during a search and seizure operation at the premises of the assessee. The ITO rejected the explanation provided by the assessee, claiming that the bills and vouchers belonged to M/s. Promod Hosiery, which was no longer in existence. However, the Tribunal found errors in the ITO's approach, especially in light of the detailed statements provided by individuals related to M/s. Promod Hosiery, confirming the ownership and business activities of the said firm.

The ITO's contention that M/s. Promod Hosiery had ceased to exist and its books of account were not available for verification was refuted by the detailed statements provided by Shri Yash Pal Goyal and other individuals associated with the business. Shri Yash Pal Goyal explained the business operations of Promod Hosiery, including the procurement of raw materials and the sales tax registration details. Additionally, Shri Dev Dutt and Shri Ravinder Singh corroborated the ownership and operations of Promod Hosiery, further supporting the assessee's claim that the bills and vouchers did not belong to them.

The Tribunal highlighted the erroneous application of Section 69 of the IT Act by the ITO in making the addition of Rs. 25,000. Despite the bills and vouchers belonging to someone else, the ITO unjustifiably determined the fair market value of the woollen yarn quota at Rs. 25,000 and added this amount to the assessee's income. The Tribunal emphasized that the burden of proof lay on the revenue to establish that the bills and vouchers belonged to the assessee, which the ITO failed to do. Consequently, the Tribunal allowed the appeal and deleted the addition of Rs. 25,000 sustained by the AAC.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the inadequacies in the ITO's decision-making process and the lack of justification for the addition made to the total income. The detailed statements provided by individuals associated with M/s. Promod Hosiery effectively refuted the claims made by the revenue authorities, leading to the deletion of the disputed amount from the assessee's income for the relevant assessment year.