1993 (12) TMI 93 - AT - Income Tax

Assessee s Appeal, Assessing Officer, Assessment Proceedings, Assessment Year, Cash Credits, Delay In Filing Appeal, In Part

Issues Involved:
1. Admissibility of the appeal by the assessee considering the change in law regarding the admissibility of appeals effective from 1-4-1989.
2. Deletion of the addition of Rs. 9,84,720 representing credits in the partners' accounts.
3. Deletion of the addition of Rs. 10,00,000 under inadmissible expenses due to the absence of an audit report under section 44AB of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Admissibility of the Appeal:
The first ground of appeal concerns whether the CIT(A) erred in admitting the appeal of the assessee due to the change in law effective from 1-4-1989, which withdrew the power of the CIT(A) to condone the lapse of admitted tax. The assessee filed its return on 9-2-1989 but did not pay the tax due. The assessment was completed on 30-3-1989, and the assessee filed an appeal on 26-4-1989 without paying the tax. The tax was subsequently paid on 20-6-1989, and another appeal was filed on 22-6-1989 with a petition for condonation of delay. The CIT(A) admitted the appeal, considering the law applicable before 1-4-1989, which allowed condonation for non-payment of tax on admitted income. The Tribunal upheld the CIT(A)'s decision, citing that the right of appeal is a substantive right that accrues when proceedings are initiated, not when the decision is made. The Tribunal referenced several cases, including the Patna High Court's decision in Raja Bahadur Kamakhya Narayan Singh v. State of Bihar, and the Supreme Court's decisions in Hoosein Kasam Dada (India) Ltd. v. State of Madhya Pradesh and State of Bombay v. Supreme General Films Exchange Ltd., to support this view. The Tribunal concluded that the law as it stood before 1-4-1989 applied, and the CIT(A) was correct in admitting the appeal.

2. Deletion of the Addition of Rs. 9,84,720:
The second issue concerns the deletion of the addition of Rs. 9,84,720 representing credits in the partners' accounts. The Assessing Officer added this amount, considering it unexplained credits. The assessee explained that the amount represented income accounted for in the books of a sister concern, M/s. Nidhish Transport Corporation, for the assessment year 1983-84, and was treated as the assessee's income. The CIT(A) accepted this explanation, noting that the entries were rectification entries to reconcile balances with the sister concern. The Tribunal upheld the CIT(A)'s decision, noting that the entries were contra-entries with no actual cash inflow or outflow, thus not constituting income for the impugned assessment year. The Tribunal also noted that the amount was already considered in the assessment year 1983-84, and the entries in the assessment year 1986-87 were duplications. Therefore, the addition was rightly deleted.

3. Deletion of the Addition of Rs. 10,00,000:
The third issue involves the deletion of the addition of Rs. 10,00,000 under inadmissible expenses due to the absence of an audit report under section 44AB. The Assessing Officer estimated inadmissible expenses based on past mistakes reported by the auditor. The CIT(A) deleted the addition, finding it without basis and unsustainable. The Tribunal agreed, criticizing the addition as conjectural and unsupported by evidence. The Tribunal emphasized that suspicion cannot replace proof and that the Assessing Officer should have pinpointed specific defects or invoked section 142(2A) before making such an addition. The Tribunal concluded that the CIT(A) rightly deleted the addition.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on all grounds, dismissing the revenue's appeal. The appeal was admitted based on the law prior to 1-4-1989, the addition of Rs. 9,84,720 was deleted as it was a rectification entry, and the addition of Rs. 10,00,000 was deleted as it was conjectural and without basis.

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