1989 (1) TMI 173 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of the addition of Rs. 8,08,100 made on account of security deposits and advances.
2. Deletion of the addition of Rs. 2,65,600 made as income from undisclosed sources.
3. Deletion of the addition of Rs. 1,78,400 held to be squared up accounts and amount refunded treated as income.

Issue-wise Detailed Analysis:

1. Deletion of the addition of Rs. 8,08,100 made on account of security deposits and advances:

The Revenue argued that the security deposits received by the assessee were not genuine and should be treated as income. The search conducted on 6th March 1981 revealed materials, including blank receipts and registers, indicating 644 workers were sent abroad, contrary to the assessee's claim of 520. The ITO viewed the security deposits as income, citing statements from Mohammed Illias and Nazar Ahmed denying any security deposits. However, the CIT(A) deleted the addition, finding the statements invalid as they were recorded without the assessee's presence and noting the refund of Rs. 70,500 as evidence of genuine security deposits. The Tribunal upheld the CIT(A)'s decision, emphasizing the detailed records and agreements supporting the assessee's claim and rejecting the Revenue's suspicion-based argument.

2. Deletion of the addition of Rs. 2,65,600 made as income from undisclosed sources:

The Revenue contended that the amount included security deposits, ticket advances, service charges advances, and refunds, which were transferred to the general advance account. The CIT(A) verified the records and found these amounts were refunded to the respective persons, concluding they were not unexplained income. The Tribunal confirmed this finding, noting the detailed accounts provided by the assessee showing the refunds, thus treating the Revenue's claim as unfounded.

3. Deletion of the addition of Rs. 1,78,400 held to be squared up accounts and amount refunded treated as income:

Similar to the previous issue, the amount represented squared-up accounts where individuals who could not secure jobs abroad were refunded. The CIT(A) found that these amounts were indeed refunded, verifying the records. The Tribunal upheld the CIT(A)'s decision, agreeing that the amounts were properly accounted for and not unexplained income.

Cross Objection by the Assessee:

The assessee raised six grounds in the cross objection, but only ground Nos. 3 to 6 were argued. The CIT(A) had remanded the issue back to the ITO, but the assessing officer did not act by the deadline, making the issues academic. Consequently, these grounds were dismissed unanswered.

Conclusion:

The Tribunal dismissed both the Revenue's appeal and the assessee's cross objection, confirming the CIT(A)'s order on all issues. The detailed records and evidence provided by the assessee were found to be credible, and the additions made by the ITO were deemed improper.