1979 (7) TMI 129 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 24,500 under s. 68 of the IT Act, 1961 by the learned AAC.
2. Addition of Rs. 5000 each in the trading a/c and out of labour charges.
3. Inclusion of Rs. 10,998 under s. 40A(3) of the said Act.
4. Disallowance of bad debt of Rs. 2000.

Analysis:

Issue 1: Addition of Rs. 24,500 under s. 68 of the IT Act, 1961 by the learned AAC:
The Income Tax Officer (ITO) included Rs. 25,000 as income from an undisclosed source due to discrepancies in cash entries. The Appellate Authority Commissioner (AAC) deleted this addition but added Rs. 24,500 based on two specific cash credits. The Tribunal held that the AAC exceeded his authority by adding new income sources not considered by the ITO, contrary to legal provisions. Citing a Supreme Court decision, the Tribunal ruled in favor of the assessee, deleting the addition of Rs. 24,500.

Issue 2: Addition of Rs. 5000 in the trading a/c and Rs. 10,998 under s. 40A(3):
The AAC did not press for the addition of Rs. 5000 in the trading account and Rs. 10,998 under s. 40A(3), leading to their dismissal without further consideration.

Issue 3: Disallowance of bad debt of Rs. 2000:
The ITO disallowed a bad debt of Rs. 2000, stating it was written off on personal grounds. The AAC upheld the disallowance as the purpose of the advance was not proven to be for business, and its irrecoverability was not adequately demonstrated. The Tribunal agreed with the AAC's decision, sustaining the disallowance.

In conclusion, the Tribunal partially allowed the appeal, deleting the addition of Rs. 24,500 while restoring the disallowance of Rs. 5000 in labour charges for further consideration. The disallowance of the bad debt of Rs. 2000 was upheld due to insufficient evidence of the debt being for business purposes.