2001 (9) TMI 245 - AT - Income Tax

Summary

Issues:
Addition made on account of daily wages in respect of contract business.

Analysis:
The appeals were filed by both the Revenue and the assessee against the order of the CIT(A) for the assessment year 1992-93. The common ground in both appeals was the addition made by the AO on account of daily wages in relation to a contract business. The AO added Rs. 75,000 due to discrepancies in the signatures and thumb impressions of laborers. The CIT(A) sustained an addition of Rs. 45,000 and granted relief of Rs. 30,000 to the assessee. Both parties appealed to the Tribunal.

The authorized representative for the assessee argued that the signatures of laborers in a labor-oriented contract business are bound to vary, and the AO did not properly examine the concerned persons before making the addition. The Departmental Representative contended that the same set of laborers were engaged continuously, so discrepancies in signatures were not justified. The Tribunal considered the arguments and records, noting that the AO did not summon the laborers or compare the signatures properly.

The Tribunal referred to legal principles, stating that the AO should have sought expert assistance to compare signatures and thumb impressions. The Tribunal highlighted that the Indian Evidence Act principles could be applied, emphasizing the need for expert opinion in such cases. It was noted that the first appellate authority rightly accepted the explanation offered by the assessee, and the AO erred in making the addition based on signature variations.

Regarding the addition made by the first appellate authority on an estimate basis, the Tribunal found it unjustified as there was no material to support the decision. The Tribunal emphasized that unless the authorities were dissatisfied with the accounts' correctness and completeness, they could not make additions based on estimates. Consequently, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, directing the AO to allow the entire sum claimed towards daily wages account.