1990 (10) TMI 136 - AT - Income Tax

Summary

Issues Involved:
1. Sustaining of additions by CIT(A) in various assessment years.
2. Treatment of interest income earned on fixed deposits of unutilized grants-in-aid.
3. Rejection of claims under sections 80J and 80HH.
4. Non-admission of additional ground for exemption under section 10(23BB).

Issue-wise Detailed Analysis:

1. Sustaining of Additions by CIT(A):
The assessee's appeals contested the CIT(A)'s decision to sustain additions of Rs. 5 lakhs for the assessment years 1980-81, 1981-82, and 1983-84, and Rs. 10 lakhs for the assessment year 1982-83. The CIT(A) noted discrepancies in the assessee's books, including disorderly entries, cuttings, and overwritings, making verification of transactions impossible. The CIT(A) found that the assessee's accounts were not audited, and the profit and loss accounts were compiled without reference to primary books. Consequently, the CIT(A) computed the income afresh, leading to the sustained additions. The tribunal observed that while the Assessing Officer and CIT(A) pointed out defects, they did not provide a basis for the additions. The tribunal emphasized that even for estimates under section 145(1), a basis must be provided. The tribunal decided to remand the matter to the ITO for verification of the final profit and loss account, balance sheet, and reconciliation submitted by the assessee, considering the assessee's status as a government undertaking.

2. Treatment of Interest Income Earned on Fixed Deposits of Unutilized Grants-in-Aid:
The Revenue's appeal challenged the CIT(A)'s decision to treat interest income on fixed deposits of unutilized grants-in-aid as a capital receipt, not taxable. The CIT(A) accepted the assessee's claim, supported by a letter from the Finance Secretary, U.P. Government, and a Tribunal decision in a similar case, that interest earned on grant-in-aid should be treated as grant-in-aid and utilized for specified objects. The tribunal, considering the interrelation with the books of account, remanded this issue to the ITO for fresh consideration and verification.

3. Rejection of Claims under Sections 80J and 80HH:
The assessee's claim for deductions under sections 80J and 80HH was rejected by the CIT(A) due to unaudited accounts. The CIT(A) noted that the correctness of these claims could not be ascertained without audited accounts. The tribunal, considering that the matter is being remanded for verification of accounts, decided to send this issue back to the ITO for fresh consideration along with the first issue.

4. Non-admission of Additional Ground for Exemption under Section 10(23BB):
The assessee's claim for exemption under sections 10(20) and 10(23BB) was not admitted by the CIT(A), citing the Supreme Court decision in Addl. CIT vs. Gurjargravures (P) Ltd. The assessee argued that as a government undertaking, the claim should be admitted. The tribunal, acknowledging that the assessee is a government undertaking with no personal benefit to individuals, set aside the CIT(A)'s findings and admitted the claim, remanding the issue to the ITO for fresh consideration.

Conclusion:
The tribunal remanded the matters to the ITO for fresh verification and consideration, emphasizing the need for a basis in making additions and the importance of audited accounts in determining the correctness of claims. The appeals of both the assessee and the Revenue were allowed for statistical purposes.