1979 (1) TMI 139 - AT - Income Tax

Summary

Issues:
Appeal against addition of cash credit in assessment for asst. yr. 1975-76.

Analysis:
The appeal was filed by the assessee against the addition of Rs. 10,000 made by the ITO in the assessment for the year 1975-76, which was confirmed by the AAC. The cash credit in question appeared in the name of Shri Kalyandas Chotmal, and the explanation provided by the assessee regarding the nature and source of the deposit was not accepted by the authorities. Both the ITO and the AAC did not believe the explanation provided by the assessee and concluded that the amount represented the assessee's own money introduced as a loan. The creditor, Shri Kalyandas Chotmal, stated that he had advanced a loan of Rs. 10,000 to the assessee, attributing the source of the deposit to his savings and money received from his father at the time of division. The lower authorities disregarded this explanation and treated the cash credit as the income of the assessee without sufficient basis.

Upon reviewing the deposition of the creditor, it was found that he had been in service from 1968 to 1973 and subsequently started his own business as a broker. The creditor's income details were provided, showing that he had the means to advance a loan of Rs. 10,000. Discrepancies were noted in the treatment of similar cash deposits in other cases by the ITO, where some were accepted as genuine based on the creditors being income tax assessees or having long service histories. However, in this case, the ITO questioned the source of the cash credit due to the assessee's inability to produce evidence of receiving Rs. 4,000 from his father and not depositing the amount in a bank or post office. Despite these discrepancies, it was concluded that the assessee had sufficient means to receive the loan, and the lower authorities were deemed unjustified in treating the cash credit as the assessee's income.

In light of the above analysis, the appeal was allowed, overturning the addition of Rs. 10,000 to the assessee's income for the assessment year 1975-76.