1975 (8) TMI 59 - AT - Income Tax

Issues Involved:

1. Assessment of Rs. 30,000 as the assessee's income from undisclosed sources.
2. Assessee's appeal against the assessment of Rs. 10,000.
3. Department's appeal against the relief of Rs. 20,000 granted by the AAC.

Detailed Analysis:

1. Assessment of Rs. 30,000 as the assessee's income from undisclosed sources:

The Income Tax Officer (ITO) assessed a sum of Rs. 30,000 as the income of the assessee from undisclosed sources. The assessee, a registered firm dealing in watches, was raided by Custom Authorities on 6th Sept., 1966. During the raid, cash of Rs. 30,000 was found at the residence of the partners. The day book of the assessee showed an entry of Rs. 30,000 from one Bhagwan Das, but this entry was not dated. The ITO questioned Bhagwan Das, who confirmed the loan and provided details regarding the source of the Rs. 30,000. However, the ITO rejected this evidence, citing various reasons such as the incomplete cash book, the relationship between Bhagwan Das and one of the partners, and the improbability of the loans being genuine.

2. Assessee's appeal against the assessment of Rs. 10,000:

The Appellate Assistant Commissioner (AAC) found the assessee's explanation satisfactory for Rs. 20,000 but not for the remaining Rs. 10,000. The AAC noted that the loans from Ram Chand and Shagoofa Restaurant were corroborated by affidavits and assessment records. However, there was no satisfactory explanation for the remaining Rs. 5,000 from Tulsidas Pokhardas and another Rs. 5,000 claimed to be lying at home. The assessee contended that Bhagwan Das had a genuine existence and the capacity to advance Rs. 30,000. The AAC accepted the explanation for Rs. 20,000 but sustained the assessment for Rs. 10,000.

3. Department's appeal against the relief of Rs. 20,000 granted by the AAC:

The Department argued that the AAC erred in granting relief of Rs. 20,000. They emphasized that Bhagwan Das's loans were for non-business transactions and should not have been recorded in the cash book. They also pointed out the improbability of Bhagwan Das having Rs. 5,000 in cash at home and the lack of evidence for the loans from Tulsidas Pokhardas.

Conclusion:

The Tribunal considered the submissions and material on record. They noted that the entry of Rs. 30,000 in the day book at the time of the raid could not be ignored. The books of Bhagwan Das showed the receipt of loans from three parties, and the ITO failed to summon these parties for further examination. The Tribunal found that the ITO's action in disbelieving the loans was based on suspicion. They concluded that the assessee had discharged the burden of proving the nature and source of the Rs. 30,000. Therefore, the addition of Rs. 10,000 sustained by the AAC was deleted, and the appeal by the Department was dismissed.

Judgment:

The appeal by the assessee (ITA No. 307) was allowed, and the appeal by the Department (ITA No. 3075) was dismissed.

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