1980 (9) TMI 165 - AT - Income Tax

Summary

Issues:
Assessment of undisclosed income based on deposits in the name of individuals, Confirmation of deposits by the assessee, Examination of dissolution deed and related accounts, Credibility of statements made by the individuals involved, Rejection of prayer for handwriting expert examination, Limitation period for claiming amount, Addition of running account amount in the name of M/s. Sundaram Babulal.

Analysis:
The appeal before the ITAT Patna involved the assessment of undisclosed income for the assessment year 1965-66 based on deposits found in the cash books of the assessee HUF. The ITO treated the total amount of Rs. 86,279 as income from undisclosed sources as the assessee failed to explain the nature and source of these deposits. The AAC initially confirmed these additions, leading to an appeal before the Tribunal.

The Tribunal, upon review, found discrepancies in the assessment. It was revealed that the deposits were related to the dissolution of a firm, M/s. Buxiram Laxminarayan, and the subsequent distribution of assets among partners. The Tribunal noted that the ITO had not thoroughly questioned Shri Sundaram Narnoli about his financial dealings with the assessee, leading to doubts about the assessment. Therefore, the Tribunal set aside the AAC's order for further investigation.

Subsequently, the AAC upheld the additions of Rs. 77,479 and Rs. 8,800, citing reasons such as denial of ownership and lack of confirmation from the concerned parties. However, the Tribunal analyzed the deed of dissolution, accounts, and statements provided by the assessee, concluding that the deposits were adequately explained. The Tribunal found that the deposits were related to the assets allotted to Shri Sundaram Narnoli upon the dissolution of the partnership, and the running account with M/s. Sundaram Babulal was also satisfactorily explained.

The Tribunal scrutinized the credibility of statements made by Shri Sundaram Narnoli, noting discrepancies between his claims and the documentary evidence provided by the assessee. Despite the denial of signatures and ownership, the Tribunal found substantial evidence supporting the assessee's explanations. The Tribunal also rejected the plea for a handwriting expert examination, emphasizing the available materials for decision-making.

Regarding the limitation period for claiming the amount, the Tribunal held that the payments made by the assessee extended the period, and Shri Sundaram Narnoli could still claim the amount even after the admission of debt. Ultimately, the Tribunal deleted the entire addition of Rs. 86,279, ruling in favor of the assessee and allowing the appeal in full.