1996 (9) TMI 177 - AT - Income Tax

Summary

Issues Involved:
1. Timeliness of the appeal filing.
2. Ownership of the business in manufacture of silver and silver chains.
3. Source of acquisition of metals found during the search.
4. Addition made on account of job receipts.
5. Unexplained deposits.
6. Disallowance of salary and supervision charges.
7. Purity and valuation of silver articles.

Detailed Analysis:

1. Timeliness of the Appeal Filing:
The appeal in ITA No. 8419/Del/1991 was filed one day late. After hearing the assessee, the delay was condoned, and the appeal was admitted for disposal on merits.

2. Ownership of the Business in Manufacture of Silver and Silver Chains:
The primary issue was whether the business in the manufacture of silver and silver chains belonged to Shri Kamal Singh or his brothers, Shri Rakesh Singh and Shri Prem Singh. The learned authorized representative argued that the business belonged to Rakesh Singh and Prem Singh, supported by their admissions and returns filed for assessment years 1983-84 to 1986-87. The Departmental Representative pointed out discrepancies and argued that the business belonged to Kamal Singh, supported by a statement from Smt. Satyawati. The Tribunal concluded that the stock in silver belonged to Rakesh Singh and Prem Singh, as admitted by them in their returns, and not to Kamal Singh. Therefore, the addition of Rs. 2,08,000 was not sustainable in Kamal Singh's hands and had to be considered in the hands of Rakesh Singh and Prem Singh.

3. Source of Acquisition of Metals Found During the Search:
The AO made an addition of Rs. 12,500 for the cost of acquisition of metals like copper, gilt, and iron rods, arguing that the source was not considered in the assessment for the year 1987-88. The CIT(A) deleted the addition, mistakenly linking it to silver wastage. The Tribunal upheld the deletion, noting the assessee had been assessed to tax for a long time, and no material showed excess articles beyond what was taxed in earlier years.

4. Addition Made on Account of Job Receipts:
The AO estimated job receipts at Rs. 1,20,000 and made an addition of Rs. 23,161, noting discrepancies in the accounts. The CIT(A) deleted the addition, finding no discrepancies. The Tribunal found the expenses claimed were not verifiable and upheld an addition of Rs. 10,000, allowing a relief of Rs. 13,161.

5. Unexplained Deposits:
The AO made an addition of Rs. 40,500 for unexplained deposits in the names of four parties. The CIT(A) deleted the addition, noting the names appeared in balance sheets from 1983-84 to 1987-88, and no material showed the amounts were raised in the year under consideration. The Tribunal upheld the deletion.

6. Disallowance of Salary and Supervision Charges:
The CIT(A) upheld the disallowance of salary paid to Shri Rakesh Singh and supervision charges paid to Shri Ram Singh. The Tribunal agreed, finding no supporting evidence that Rakesh Singh acted as an employee or that additional machinery was hired from Ram Singh.

7. Purity and Valuation of Silver Articles:
The AO took the purity of silver content at higher figures than warranted, leading to an addition of Rs. 2,08,923. The CIT(A) accepted the assessee's version, considering advances made and silver reflected in balance sheets. The Tribunal found no conclusive evidence for either side's estimates but sustained an addition of Rs. 25,000 each in the hands of Rakesh Singh and Prem Singh, partially upholding the relief allowed by the CIT(A).

Conclusion:
The Tribunal partly allowed the Revenue's appeals in ITA Nos. 8419, 8422/Del/1991, and 5405/Del/1990, while dismissing the assessee's appeal in ITA No. 5899/Del/1990. The Tribunal upheld the CIT(A)'s findings on several issues but made adjustments where necessary, particularly in the valuation and ownership of silver articles.