1979 (1) TMI 138 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 8,611 to the net profit by the Income Tax Officer (ITO).
2. Inclusion of Rs. 5,000 credited in the name of Sardar Harnamsingh as income of the assessee.
3. Inclusion of Rs. 50,000 credited in the name of Shri S.N. Rana as income of the assessee.

Issue-wise Detailed Analysis:

1. Addition of Rs. 8,611 to the net profit by the Income Tax Officer (ITO):

The assessee disclosed a gross profit of Rs. 63,463 on a total turnover of Rs. 3,77,498, resulting in a net profit of Rs. 29,140, which is 9% of the gross sale. The ITO estimated the net profit at 10% and added Rs. 8,611 on the grounds that direct and indirect expenses were not fully vouched and verifiable. However, upon review, it was observed that the ITO did not provide any specific instances where expenses were unsupported by vouchers. The Appellate Tribunal found that all expenses were duly vouched and the profit disclosed by the appellant was reasonable. Consequently, the addition of Rs. 8,611 was deleted, as the lower authorities were not justified in making this addition.

2. Inclusion of Rs. 5,000 credited in the name of Sardar Harnamsingh as income of the assessee:

The ITO included a sum of Rs. 5,000 credited in the name of Sardar Harnamsingh as the income of the assessee, citing the creditor's non-appearance. The assessee provided a confirmatory letter from the creditor, who was a medical practitioner and also engaged in advancing money to other parties. The Appellate Tribunal noted that the interest was paid to the creditor and the confirmatory letter was filed. It held that if the ITO required further evidence regarding the genuineness of the loan, he should have summoned the creditor or verified the certificate through his Inspector. The addition of Rs. 5,000 was deleted as there was no justifiable reason for its inclusion solely based on the creditor's non-appearance.

3. Inclusion of Rs. 50,000 credited in the name of Shri S.N. Rana as income of the assessee:

The ITO included Rs. 50,000 credited in the name of Shri S.N. Rana on the grounds that Rana was incapable of advancing the loan, suggesting he was a name lender. The ITO based his conclusion on Rana's limited agricultural income, contradictory statements, and a partner's (Shri Om Prakash) statement against the firm. The Appellate Tribunal reviewed various documents and certificates provided by the assessee, including those from the Tehsildar, Agricultural Extension Officer, and Raigarh Cooperative Bank, which supported Rana's financial capability. It was found that Rana had sufficient agricultural income, had sold significant land, and had invested money with other parties. The Tribunal also questioned the reliability of Shri Om Prakash's statement due to his history of making baseless complaints and involvement in criminal cases. Considering all the evidence, the Tribunal concluded that the Rs. 50,000 belonged to Shri S.N. Rana out of his agricultural income and not to Shri Ramawatar, a partner of the firm. Thus, the inclusion of Rs. 50,000 as the firm's undisclosed income was deleted.

Conclusion:

The appeal was allowed, and the additions of Rs. 8,611, Rs. 5,000, and Rs. 50,000 to the assessee's income were deleted. The Tribunal found that the lower authorities were not justified in making these additions based on the evidence presented.