1991 (11) TMI 126 - AT - Income Tax

Summary

Issues Involved:

1. Estimated addition of Rs. 3,000 for unrecorded commission on sales.
2. Addition of Rs. 48,378 for alleged investments in money-lending business.
3. Addition of Rs. 41,000 for interest on alleged investments.
4. Addition of Rs. 3,500 for unrecorded interest.
5. Addition of Rs. 1,651 for unverified receipt.
6. Addition of Rs. 18,660 for alleged investments found in a diary.
7. Addition of Rs. 4,356 and Rs. 22,452 for claimed losses.
8. Addition of Rs. 10,000 based on a letter found during the search.
9. Addition of Rs. 3,000 and Rs. 90 for a pronote found during the search.
10. Addition of Rs. 600 for estimated interest on old pronotes.
11. Trading additions of Rs. 37,301.
12. Charging of interest under s. 217.

Detailed Analysis:

1. Estimated Addition of Rs. 3,000 for Unrecorded Commission on Sales:

The assessee objected to the addition of Rs. 3,000 made by the Assessing Officer for unrecorded commission on sales to thela-walas. The tribunal found that the petty commissions were verifiable and recorded in the day book. It was reasonable that these amounts were spent on employee entertainment and not credited to the commission account. The addition of Rs. 3,000 was deleted.

2. Addition of Rs. 48,378 for Alleged Investments in Money-Lending Business:

The Assessing Officer added Rs. 48,378 as unexplained investments found in a ledger marked C-23. The assessee argued that the ledger did not belong to them and was not found in their possession. The tribunal found no evidence linking the document to the assessee and deleted the addition.

3. Addition of Rs. 41,000 for Interest on Alleged Investments:

The Assessing Officer estimated an additional Rs. 41,000 as interest on the alleged investments. The tribunal found no evidence of the assessee engaging in money-lending business and deemed the additions as conjectural. The addition was deleted.

4. Addition of Rs. 3,500 for Unrecorded Interest:

The Assessing Officer added Rs. 3,500 for unrecorded interest found in a constituent's account. The tribunal held that a mere book entry could not be treated as income and found no reason for the assessee to charge interest from only one constituent. The addition was deleted.

5. Addition of Rs. 1,651 for Unverified Receipt:

The Assessing Officer added Rs. 1,651 based on a receipt in the name of Haji Chhotu Bhai. The tribunal found no basis for the addition as the details of the transaction were unclear. The addition was deleted.

6. Addition of Rs. 18,660 for Alleged Investments Found in a Diary:

The Assessing Officer added Rs. 18,660 based on a diary found in the name of Shri Roopchand. The tribunal held that the presumption under s. 132(4A) was rebuttable and accepted the assessee's explanation that the diary belonged to Shri Roopchand. The addition was deleted.

7. Addition of Rs. 4,356 and Rs. 22,452 for Claimed Losses:

The Assessing Officer rejected the assessee's claim of Rs. 4,356 as bad debts and Rs. 22,452 as a loss in a joint venture. The tribunal upheld the disallowance of Rs. 4,356 due to lack of evidence but allowed the claim of Rs. 22,452 based on regular entries in the books of account. The addition of Rs. 22,452 was deleted.

8. Addition of Rs. 10,000 Based on a Letter Found During the Search:

The Assessing Officer added Rs. 10,000 based on a letter found during the search. The tribunal found no justification for the addition as the letter indicated a personal transaction of a partner, not the firm. The addition was deleted.

9. Addition of Rs. 3,000 and Rs. 90 for a Pronote Found During the Search:

The Assessing Officer added Rs. 3,000 and Rs. 90 based on a pronote found during the search. The tribunal found no evidence linking the pronote to the firm and deleted the addition.

10. Addition of Rs. 600 for Estimated Interest on Old Pronotes:

The Assessing Officer added Rs. 600 for estimated interest on old pronotes found during the search. The tribunal found no basis for the addition as the pronotes did not specify interest and were time-barred. The addition was deleted.

11. Trading Additions of Rs. 37,301:

The Assessing Officer made trading additions of Rs. 37,301 by estimating sales and gross profit rates. The tribunal agreed that the books of account were unreliable but found the estimates excessive. The tribunal adjusted the estimates, resulting in a relief of Rs. 15,490 to the assessee.

12. Charging of Interest Under s. 217:

The assessee requested consequential relief for interest charged under s. 217. The tribunal found the request reasonable and directed the Assessing Officer to allow the relief.

Conclusion:

The appeal was partly allowed, with several additions deleted and adjustments made to the trading additions.