1994 (12) TMI 130 - AT - Income Tax

Issues Involved:

1. Addition of Rs. 5,09,792 to the assessee's income.
2. Disallowance of Rs. 1,000 out of telephone expenses.
3. Disallowance of Rs. 2,000 out of advertisement expenses.

Issue-wise Detailed Analysis of the Judgment:

1. Addition of Rs. 5,09,792 to the Assessee's Income:

The primary issue in this appeal was the addition of Rs. 5,09,792 to the assessee's income. The assessee, a registered firm engaged in the manufacture and export of various goods, returned an income of Rs. 1,37,623 for the year ending Diwali 1985. The Assessing Officer (AO) noted discrepancies in the premium on sale of REP licenses, where the premium shown in the books was significantly lower than the market value. The AO issued letters to the concerned purchasers to verify the authenticity of the transactions. While parties in Bombay and Delhi confirmed the purchases, Mr. K.K. Duggar of M/s. Duggar Exim Linkers, Jaipur, could not confirm due to his books being seized. However, a diary seized from Mr. Duggar's possession indicated higher premiums paid in cash, which were not reflected in the assessee's books. The AO concluded that a sum of Rs. 5,09,792 was unaccounted for and added it to the assessee's income.

In appeal, the CIT(A) upheld the AO's addition, agreeing that the prevailing market conditions justified the addition. The Tribunal, however, dissected the addition into two parts: Rs. 2,50,896 and Rs. 2,58,806. The former was based on Mr. Duggar's statement and corroborated by the diary entries, while the latter was based on the AO's assumption of similar transactions.

The Tribunal upheld the addition of Rs. 2,50,896, finding it had a firm basis supported by Mr. Duggar's statement and the diary entries. The Tribunal noted that the assessee had an opportunity to cross-examine Mr. Duggar but declined, thus validating the AO's reliance on this evidence. However, the Tribunal deleted the addition of Rs. 2,58,806, finding it based on assumptions without corroborative evidence. The Tribunal emphasized that assumptions, no matter how justified, cannot replace concrete evidence.

2. Disallowance of Rs. 1,000 out of Telephone Expenses:

The assessee also challenged the disallowance of Rs. 1,000 out of telephone expenses. However, this ground was not pressed during the hearing and was accordingly dismissed by the Tribunal.

3. Disallowance of Rs. 2,000 out of Advertisement Expenses:

Similarly, the disallowance of Rs. 2,000 out of advertisement expenses was also challenged but not pressed during the hearing. This ground was also dismissed by the Tribunal.

Conclusion:

The Tribunal partly allowed the appeal. The addition of Rs. 2,50,896 to the assessee's income was upheld, while the addition of Rs. 2,58,806 was deleted. The disallowances of Rs. 1,000 and Rs. 2,000 out of telephone and advertisement expenses, respectively, were dismissed as they were not pressed during the hearing.

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