1979 (6) TMI 76 - AT - Income Tax

Summary

Issues:
1. Assessment of income from truck plying for the assessment years 1972-73 and 1973-74.
2. Power of the Appellate Authority to enhance assessment by adding new sources of income not considered by the assessing officer.
3. Allowance of depreciation when not claimed by the assessee.
4. Taxability of profit under section 41(2) of the Income Tax Act.

Analysis:

1. The assessee filed returns for the assessment years 1972-73 and 1973-74, declaring income from truck plying and self-occupied property. The Income Tax Officer (ITO) estimated income from truck plying higher than declared, resulting in additions for both years. The assessee appealed, challenging the ITO's assessment of truck plying income.

2. The Appellate Authority Commissioner (AAC) allowed the appeal for 1972-73, deleting the addition in truck plying income. However, the AAC introduced a new formula to compute income, not claimed by the assessee or ITO. For 1973-74, the AAC added profit under section 41(2) on the sale of a truck, not considered by the ITO, leading to an enhancement of income.

3. The counsel argued that the AAC exceeded power by enhancing income with unclaimed items. The Tribunal referred to Supreme Court decisions limiting the AAC's authority to add new income sources not in the return or ITO's order. It was held that the AAC could not enhance income by adding new sources like profit under section 41(2).

4. The Tribunal addressed the issue of depreciation allowance. Although the assessee did not claim depreciation, the AAC allowed it for 1972-73. The Tribunal cited a case supporting the authority to grant depreciation even if unclaimed. The Tribunal distinguished another case where profits were not added due to lack of past depreciation allowance, stating that in the present case, depreciation was allowed by the AAC.

5. The Tribunal dismissed the appeal for 1972-73 but allowed the appeal for 1973-74, deleting the addition made by the AAC. It was concluded that the AAC had no power to enhance income by adding profit under section 41(2) as it was a new item of income not considered by the ITO.