1989 (6) TMI 85 - AT - Income Tax

Issues Involved:
1. Unexplained cash credits for the assessment year 1975-76.
2. Addition of income from Shri Subhash Chandra as belonging to the assessee firm.
3. Unexplained investment in house property construction for the assessment year 1976-77.
4. Delay in filing cross-objections for the assessment years 1975-76 and 1976-77.
5. Penalty under section 271(1)(C) for the assessment year 1976-77.

Detailed Analysis:

1. Unexplained Cash Credits for the Assessment Year 1975-76:
The Income Tax Officer (ITO) identified three cash credits totaling Rs. 55,000 as unexplained, whereas the Appellate Assistant Commissioner (AAC) treated them as explained and deleted the additions. The cash credits were from:
- Sahu Munish Chandra (Rs. 25,000)
- Smt. Jeewan Jyoti (Rs. 25,000)
- Smt. Ram Kishori (Rs. 5,000)

Sahu Munish Chandra:
The assessee provided letters and an affidavit from Munish Chandra explaining the source of the Rs. 25,000. The ITO did not issue summons under section 131 to this creditor, who was later examined and corroborated his affidavit. The AAC accepted the identity and financial capacity of Munish Chandra, and the deletion of Rs. 25,000 was upheld.

Smt. Jeewan Jyoti:
The assessee claimed that Smt. Jeewan Jyoti received a gift of Rs. 25,000 from her mother, Smt. Vijay Laxmi, confirmed by an affidavit and a return of gift. The AAC accepted this, and the deletion of Rs. 25,000 was justified as the financial capacity of Smt. Vijay Laxmi was established.

Smt. Ram Kishori:
The assessee provided an affidavit from Smt. Ram Kishori explaining the source of Rs. 5,000. The ITO's objections were dismissed by the AAC, and the deletion of Rs. 5,000 was upheld.

2. Addition of Income from Shri Subhash Chandra:
The ITO added Rs. 20,000 to the assessee firm's income, treating Subhash Chandra's business income as belonging to the firm. The AAC found that Subhash Chandra's business was separate and independent, supported by affidavits and examination. The deletion of Rs. 20,000 was upheld.

3. Unexplained Investment in House Property Construction for the Assessment Year 1976-77:
The ITO added Rs. 21,297 as unexplained investment in house construction. The AAC found that the house belonged to Shri Subhash Chandra, who was shown to have met the construction costs and received rent from the property. The deletion of Rs. 21,297 was confirmed.

4. Delay in Filing Cross-Objections for the Assessment Years 1975-76 and 1976-77:
The assessee filed cross-objections late, supported by affidavits explaining the delay. The AAC accepted the delay as reasonable and condoned it. The additions of Rs. 8,500 and Rs. 10,000 as income of the assessee firm were deleted, as the business transactions were separate and independent.

5. Penalty under Section 271(1)(C) for the Assessment Year 1976-77:
The ITO levied a penalty of Rs. 40,000 based on additions of Rs. 40,163. The AAC canceled the penalty as the additions were deleted, removing the basis for the penalty. The cancellation was upheld.

Conclusion:
The appeals by the Department were dismissed, and the cross-objections by the assessee were allowed. The deletions of the additions and the cancellation of the penalty were upheld, confirming the AAC's decisions.

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