1984 (6) TMI 116 - AT - Income Tax

Summary

Issues Involved:
1. Estimation of professional income.
2. Inclusion of Rs. 4,30,000 in the total income of the assessee.
3. Deletion of Rs. 3,05,000 added by the ITO as income from other sources.

Issue-wise Detailed Analysis:

1. Estimation of Professional Income:
The first ground in the assessee's appeal concerns the estimation of his professional income. The assessee declared his professional income at Rs. 20,597. However, the ITO rejected this figure, citing the absence of any books of account and a significant payment received for a compensation case, estimating the income at Rs. 45,000. This estimation was confirmed by the CIT (A).

Upon further appeal, the assessee argued that the estimation lacked any basis and presented past and subsequent records showing his professional income had never exceeded Rs. 25,000. The Tribunal, after considering both parties' submissions and the assessee's records, concluded that a reasonable estimation of the professional income would be Rs. 25,000.

2. Inclusion of Rs. 4,30,000 in the Total Income:
The next issue pertains to the inclusion of Rs. 4,30,000 in the assessee's total income. This ground is linked with the Revenue's cross-objection regarding the deletion of Rs. 3,05,000 added by the ITO as income from other sources.

The ITO included Rs. 4,30,000 in the assessee's income based on a slip of paper found during a CBI search at the residence of the managing director of Sonapur Tea Co. (P) Ltd. The slip indicated a payment of Rs. 4,30,000 to "Pathak" on 5th Dec., 1972. The ITO also noted that the assessee opened two bank accounts on the same date, depositing Rs. 1,75,000 and Rs. 1,30,000 respectively, and that these accounts were introduced by the managing director of Sonapur Tea Co. (P) Ltd.

The assessee denied receiving such an amount and explained that the bank deposits represented unpaid compensation money from various clients. The CIT (A) upheld the addition of Rs. 4,30,000 but deleted the Rs. 3,05,000 addition, considering it a duplicate addition.

In the Tribunal, the assessee argued that the addition was unjustified as it was based on a photocopy of a slip, which was not shown to the assessee and lacked evidentiary value under the Evidence Act. The Tribunal observed that the original slip was not seen by the ITO, and the slip did not mention the full name of the assessee. Moreover, the managing director of Sonapur Tea Co. (P) Ltd. denied paying the amount, and their books of account did not reflect such a payment. The Tribunal concluded that the addition of Rs. 4,30,000 was made without a sound basis and directed its deletion.

3. Deletion of Rs. 3,05,000 Added by the ITO:
The ITO added Rs. 3,05,000 as unexplained income, which was deposited by the assessee in two banks on 5th Dec., 1972. The assessee claimed this amount was unpaid compensation money from clients, deposited with him for potential refunds to the government.

The CIT (A) deleted this addition, considering it a duplicate since Rs. 4,30,000 was already included in the professional income. The Revenue's cross-objection argued that the nature and source of this deposit were not satisfactorily explained.

The Tribunal found that the clients had received substantial compensation and had deposited a portion with the assessee. The clients confirmed this before the ITO. The Tribunal concluded that the assessee satisfactorily explained the source of the Rs. 3,05,000 deposit and upheld the deletion of this addition.

Conclusion:
The appeal filed by the assessee is partly allowed, reducing the estimated professional income to Rs. 25,000 and deleting the addition of Rs. 4,30,000. The cross-objection filed by the Revenue is dismissed.