1990 (12) TMI 151 - AT - Benami Property

Issues Involved:
1. Addition of incomes earned by Smt. Shanti Devi, Smt. Mansa Devi, and M/s. Srimadhopur Textiles in the name of the assessee.
2. Clubbing of incomes from Srimadhopur Textiles, Shanti Textiles, and Mansa Textiles.
3. Discrepancies in the accounts of M/s. Manohar Textiles.
4. Protective assessments of Smt. Shanti Devi and Smt. Mansa Devi.
5. Legitimacy of cash credits and capital contributions.
6. Depreciation claims on power looms.
7. Trading additions and interest levied under sections 215, 217, and 139(8).
8. Admissibility of fresh evidence and genuineness of Srimadhopur Textiles.

Detailed Analysis:

1. Addition of incomes earned by Smt. Shanti Devi, Smt. Mansa Devi, and M/s. Srimadhopur Textiles in the name of the assessee:
The main dispute revolved around the addition of incomes earned by these entities to the income of the assessee. The Income Tax Officer (ITO) found that the businesses were run by the assessee under different names to divert profits. The ITO scrutinized the account books and found discrepancies, such as purchases and manufacturing exceeding sales and closing stock. The books were deemed defective, leading to the application of section 145(2). The ITO also found a cash credit in the name of a deceased person, which was considered bogus.

2. Clubbing of incomes from Srimadhopur Textiles, Shanti Textiles, and Mansa Textiles:
The ITO found that Srimadhopur Textiles was shown as a proprietary concern of the assessee in bank records, despite claims of partnership with Smt. Kamla Devi. Similarly, Shanti Textiles and Mansa Textiles were found to be managed by the assessee, with the respective women having no substantial knowledge or involvement in the businesses. The ITO concluded that these were benami concerns of the assessee, leading to the clubbing of their incomes with the assessee's income.

3. Discrepancies in the accounts of M/s. Manohar Textiles:
The ITO noted discrepancies in the accounts of Manohar Textiles, such as purchases and manufacturing exceeding sales and closing stock. The assessee's explanation was found unsatisfactory, leading to the conclusion that the books were not maintained regularly. An addition was made to the income based on these discrepancies.

4. Protective assessments of Smt. Shanti Devi and Smt. Mansa Devi:
The CIT(A) upheld the ITO's conclusion that the businesses run in the names of Shanti Devi and Mansa Devi belonged to the assessee. However, the AAC's decision to make protective assessments substantive was set aside, as the CIT(A) had already deleted the incomes earned by these parties from the assessee's income.

5. Legitimacy of cash credits and capital contributions:
The ITO found cash credits and capital contributions in the names of Smt. Kamla Devi and Smt. Shanti Devi to be unexplained and bogus. The CIT(A) reduced some of these additions but upheld the conclusion that the businesses belonged to the assessee.

6. Depreciation claims on power looms:
The CIT(A) directed the ITO to re-examine the question of depreciation on the electric motor and power looms, as the matter required reconsideration.

7. Trading additions and interest levied under sections 215, 217, and 139(8):
The CIT(A) reduced the trading addition in the case of Manohar Textiles and directed the deletion of interest charged under sections 215 and 217, as the assessment order did not make any reference to charging interest.

8. Admissibility of fresh evidence and genuineness of Srimadhopur Textiles:
The CIT(A) admitted fresh evidence in the form of a partnership deed for Srimadhopur Textiles and directed the ITO to re-examine the genuineness of the partnership. The CIT(A) also restored the matter to the ITO for reconsideration of the cash credits and registration of the concern.

Separate Judgments:
The Judicial Member upheld the inclusion of incomes from Shanti Devi and Mansa Devi in the assessee's income, while the Accountant Member found the Department's examination insufficient and called for fresh verification. The Third Member concluded that the incomes from the power looms run in the names of Shanti Devi and Mansa Devi belonged to them and should not be included in the assessee's income, thus resolving the difference in favor of the assessee.

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