1984 (7) TMI 166 - AT - Income Tax

Assessment Proceedings, Assessment Year, Cash Payments, Financial Year, Undisclosed Income, Unexplained Money

Summary

Issues Involved:
1. Deletion of addition of Rs. 79,753 as income from undisclosed sources.
2. Sustaining the addition of Rs. 79,753 for alleged contravention of section 40A(3) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of addition of Rs. 79,753 as income from undisclosed sources:
The revenue's grievance was that the Commissioner (Appeals) erred in deleting the addition of Rs. 79,753 made by the ITO as income from undisclosed sources. The ITO had originally added Rs. 79,753 to the total income of the assessee, alleging that the purchases from Jitender Kumar Vinod Kumar were bogus and that the amount represented unaccounted stock introduced as purchases. The Tribunal had previously set aside the assessment and directed the ITO to consider additional evidence, including the statement of Shri Om Prakash Joshi, which indicated that the assessee had accumulated unaccounted stocks and made fictitious purchases. The ITO, upon reassessment, concluded that the purchases were fake and added the amount as income from undisclosed sources. However, the Commissioner (Appeals) found that the purchases were made in January and February 1975 and that the payments were likely made around the same time, thus falling within the financial year ending March 1975. Consequently, the addition should be assessed for the assessment year 1975-76, not 1976-77. The Tribunal upheld the Commissioner (Appeals)'s view, agreeing that the goods were brought into the books in January and February 1975, and thus, any addition under section 69A should be made in the assessment year 1975-76.

2. Sustaining the addition of Rs. 79,753 for alleged contravention of section 40A(3) of the Income-tax Act, 1961:
The assessee contended that the Commissioner (Appeals) erred in sustaining the addition of Rs. 79,753 under section 40A(3), arguing that the provision was misconceived and not applicable. The Commissioner (Appeals) had sustained the addition on the basis that the payments, though claimed to be made by cheques, were in reality cash payments, which contravened section 40A(3). The Tribunal, however, found that the application of section 40A(3) requires a definite finding that expenditure was incurred and paid in cash, which was not established by the department. The Tribunal noted that the payments for the alleged purchases were made by cheques in December 1975, and there was no evidence to support the conclusion that cash payments were made. The Tribunal concluded that the addition under section 40A(3) was based on presumption and not on established facts, and thus, deleted the addition sustained by the Commissioner (Appeals).

Conclusion:
The Tribunal dismissed the departmental appeal and allowed the assessee's appeal, concluding that the addition of Rs. 79,753 as income from undisclosed sources should be assessed in the assessment year 1975-76, and the addition under section 40A(3) was not justified due to lack of evidence of cash payments.