1981 (6) TMI 96 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 3,900 in the trading account based on turnover estimation.
2. Addition of Rs. 11,000 as cash credits representing income of the assessee.

Detailed Analysis:

1. Addition of Rs. 3,900 in the trading account:
The issue revolves around the ITO's addition of Rs. 3,900 in the trading account based on defects noted in maintaining manufacturing stock registers and turnover estimation. The assessee challenged this addition, arguing that strict control over supplies and past trading results justified a lower rate of GP. The appellate tribunal analyzed the facts and held that the turnover enhancement by the ITO was not justified as the AAC of Sales tax had deleted the STO's turnover enhancement. The tribunal also found the GP rate of 16% excessive given the increase in turnover, leading to the deletion of the addition in the trading account.

2. Addition of Rs. 11,000 as cash credits:
The second issue pertains to the addition of Rs. 11,000 as cash credits representing the income of the assessee. The ITO found cash credits in the name of the assessee's son, Mr. K. Abbas, and deemed them unexplained. The AAC upheld this addition, stating Mr. Abbas was not in a position to make the deposit. The assessee argued that the burden shifted to the revenue after producing the creditor, emphasizing Mr. Abbas's capability for commission business. However, the tribunal found Mr. Abbas's explanations unsatisfactory, noting his inability to provide evidence or details about his alleged commission business. The tribunal referred to Section 68 of the IT Act, emphasizing the lack of satisfactory explanation for the cash credits. Ultimately, the tribunal upheld the authorities' decision to assess the cash credits as the income of the assessee.

In conclusion, the appellate tribunal partly allowed the appeal, deleting the addition in the trading account but upholding the addition of cash credits as the income of the assessee. The detailed analysis of each issue showcases the tribunal's thorough consideration of facts, legal provisions, and arguments presented before reaching its decision.