1990 (12) TMI 140 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 37,100 as income from undisclosed sources.
2. Addition of Rs. 41,000 as profit from business allegedly done on own account.

Issue-wise Detailed Analysis:

1. Addition of Rs. 37,100 as Income from Undisclosed Sources:

The assessee, a partnership firm, was apprehended with Rs. 58,800 in cash. The Income Tax Officer (ITO) doubted the genuineness of Rs. 37,100 out of this amount, as certain parties denied having business transactions with the assessee or making payments. The ITO added Rs. 37,100 as income from undisclosed sources. The assessee contested this addition, arguing that the statements from the parties were collected without their knowledge and were not confronted during the assessment proceedings. The Tribunal agreed with the assessee, noting that the evidence collected at the back of the assessee could not be used against them. The Tribunal found that the assessee's books of accounts, maintained in the regular course of business, showed these parties as debtors, and the transactions were supported by various registers. The Tribunal concluded that the possession of Rs. 58,800 was satisfactorily explained as business realizations, and there was no unexplained cash. Consequently, the addition of Rs. 37,100 was deleted.

2. Addition of Rs. 41,000 as Profit from Business Allegedly Done on Own Account:

The ITO assumed that business transactions amounting to Rs. 4,09,526, which the assessee claimed were on commission basis, were actually on the assessee's own account. The ITO estimated a profit of 10% on this amount and added Rs. 41,000 to the income. The assessee argued that the transactions were on commission basis and that the ITO had accepted the commission income. The Tribunal found that the ITO's assumption was based on the denial by certain parties, which was not sufficient to reject the assessee's claim. Additionally, the Tribunal noted that the ITO did not demonstrate how the assessee could have earned a profit on these transactions when other similar transactions resulted in losses. The Tribunal held that the addition of Rs. 41,000 was based on conjectures and was untenable. Therefore, the addition was deleted.

Conclusion:

The Tribunal allowed the assessee's appeal, deleting both the additions of Rs. 37,100 and Rs. 41,000. The Tribunal emphasized that the evidence collected at the back of the assessee could not be used against them and that the ITO's assumptions were not supported by concrete evidence.