1986 (1) TMI 162 - AT - Income Tax

Summary

Issues:
1. Disallowance of loss claimed by the assessee related to transactions of Khal Binola.
2. Disallowance under section 37 (3A) of the IT Act, 1961.
3. Claim under section 80-G of the IT Act, 1961.
4. Reduction in the closing stock value of silver.

Analysis:

1. Disallowance of Loss:
The assessee claimed a loss of Rs. 1,29,967 from transactions involving Khal Binola. The authorities doubted the genuineness of these transactions due to lack of evidence, as the partner of the commission agent firm could not provide details and the account books were lost. However, the ITAT found that the authorities did not consider the evidence properly. The firm's books were lost in transit, and other circumstances supported the claim's genuineness. Papers extracted from the commission agent's account books and sales-tax assessment orders indicated the transactions were legitimate. The ITAT allowed the deduction for the claimed loss, emphasizing the evidence presented.

2. Disallowance under Section 37 (3A):
The CIT did not discuss the disallowance under section 37 (3A) of the IT Act, 1961, and confirmed the disallowance made by the ITO. The ITAT found that the CIT's order lacked a finding on the merits of the issue. The case was sent back to the CIT for a fresh hearing and disposal of this ground.

3. Claim under Section 80-G:
The CIT did not discuss the ground related to the claim under section 80-G of the IT Act, 1961. The ITAT noted that even if no arguments were presented, the CIT should have given a finding on the points raised. The case was remanded to the CIT for proper consideration of this ground.

4. Reduction in Closing Stock Value of Silver:
The Revenue appealed against the deletion of an addition made by the ITO regarding the valuation of 80 Kgs. of silver. The CIT had removed the addition, considering that the rise in silver prices did not result in income for the assessee. The ITAT upheld the CIT's decision, stating that the increase in market value did not constitute income for the assessee. The ITAT dismissed the Revenue's appeal, concluding that the CIT's order was appropriate.

In conclusion, the ITAT allowed the assessee's appeal regarding the disallowed loss, directed a fresh hearing on the disallowance under section 37 (3A) and section 80-G, and dismissed the Revenue's appeal on the reduction in closing stock value of silver.