1986 (8) TMI 145 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 5,000 based on 'Jakad' notings.
2. Addition of Rs. 1,250 as profit on the above.
3. Addition of Rs. 1,657 based on nothings in a scholar note book.
4. Deletion of an addition of Rs. 2,38,571 as undisclosed investment.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 5,000 based on 'Jakad' notings:
The assessee contested the addition of Rs. 5,000 made on the basis of 'Jakad' notings found in a loose sheet during a search, arguing it was made without any basis or evidence. The Tribunal noted that similar additions were made in the previous year (1979-80) based on similar notings, which were retained because the assessee failed to prove the goods belonged to someone else. The Tribunal concluded that the addition of Rs. 5,000 was already covered by the previous year's addition and thus deleted this addition.

2. Addition of Rs. 1,250 as profit on the above:
Similarly, the profit of Rs. 1,250 earned on the Rs. 5,000 addition was also contested. The Tribunal, following the same reasoning as for the Rs. 5,000 addition, deleted this profit addition as it was considered covered by the previous year's addition.

3. Addition of Rs. 1,657 based on nothings in a scholar note book:
The assessee argued that the nothings in the scholar note book related to various trainees and did not signify any income or investment. The Tribunal agreed that even if it was assumed to be income, it could be covered by the addition made in the previous year. Consequently, the Tribunal deleted this addition as well.

4. Deletion of an addition of Rs. 2,38,571 as undisclosed investment:
The Department's appeal contested the deletion of Rs. 2,38,571, which was added as the assessee's undisclosed investment based on entries in an 'Anchor Note Book' seized during a search. The ITO concluded these entries were unexplained investments not recorded in the books, especially as they included the name 'Padam Lodha,' the assessee's brother. The CIT(A) found the affidavit of Shri Padamchand Lodha, which denied any interest in the entries, to be an important piece of evidence and concluded there was no material evidence to establish that the assessee had unrecorded business transactions. The CIT(A) held that the Department's conclusion was based on surmise or conjecture.

The Department argued that the entries in the Anchor Note Book were sufficient evidence of unrecorded transactions. The assessee countered that the Department needed positive evidence to make an addition under Section 69 and that mere suspicion was insufficient. The Tribunal agreed with the CIT(A) that the Department failed to establish a connection between the entries in the Anchor Note Book and any unrecorded transactions. However, the Tribunal noted that the burden of proof lay with the assessee, as the notings were within his special knowledge. The Tribunal remitted the matter back to the CIT(A) for a fresh examination, emphasizing the need for the assessee to establish that these notings were not related to his business.

Conclusion:
Both the assessee's and the Department's appeals were allowed. The Tribunal deleted the additions of Rs. 5,000, Rs. 1,250, and Rs. 1,657, and remitted the matter of the Rs. 2,38,571 addition back to the CIT(A) for further examination.