1980 (9) TMI 120 - AT - Income Tax

Summary

Issues:
1. Disallowance of welfare expenses and trading addition by the lower authorities.
2. Addition of income from other sources by the lower authorities.

Analysis:
Issue 1:
The assessed appealed against the disallowance of welfare expenses and trading addition by the lower authorities. The first ground regarding the disallowance of welfare expenses was withdrawn by the assessed during the appeal hearing. The lower authorities had disallowed Rs. 4,440 in lieu of welfare expenses, which was upheld based on the assessed's counsel's statement. However, the second ground related to the trading addition of Rs. 10,000 was challenged. The lower authorities had made this addition on a lump sum basis, citing inflation of expenses and the absence of withdrawals for personal expenses. The Appellate Tribunal found this approach unreasonable as no specific expenses were identified as inflated, and the absence of personal withdrawals did not justify a lump sum addition. The Tribunal reversed the lower authorities' decision on this issue and ordered the deletion of the Rs. 10,000 trading addition.

Issue 2:
Regarding the addition of Rs. 17,845 as income from other sources, the lower authorities had sustained this addition. They treated the amount as income from other sources due to the family's lack of withdrawals for personal expenses and the unexplained nature of the investment. The Appellate Tribunal disagreed with this reasoning, stating that the mere absence of personal withdrawals or explanations for other sources of income was insufficient grounds for treating the amount as income from other sources. The assessed had explained that the capital formation represented agricultural income from the production and sale of green tea, but this explanation was not accepted by the lower authorities. The Tribunal found no evidence provided by the Revenue to prove that the amount of Rs. 17,845 constituted income in the hands of the assessed. Therefore, the Tribunal ordered the deletion of the Rs. 17,845 addition as income from other sources.

In conclusion, the appeal by the assessed partly succeeded, with the disallowance of welfare expenses upheld but the trading addition and income from other sources addition being deleted.