1995 (8) TMI 108 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of certain deposits received by the assessee.
2. Addition of Rs. 70,000 as income from undisclosed sources.
3. Disallowance of Rs. 13,42,000 u/s 40A(3) of the Income-tax Act, 1961.
4. Disallowance of Rs. 6,13,000 on account of defective vouchers.
5. Addition of Rs. 50,000 as unexplained cash credits.

Summary:

1. Taxability of Certain Deposits:
The common point in these appeals relates to the taxability of certain deposits received by the assessee from flat purchasers for various purposes like transformer installation, stamp duty, water development, etc. The Assessing Officer treated these deposits as trading receipts based on directions u/s 144A, following the Supreme Court decision in Chowringhee Sales Bureau (P.) Ltd v. CIT. The CIT(A) upheld this view, noting that the amounts collected were trading receipts and not refundable. The Tribunal, however, disagreed, stating that these amounts were collected for specific purposes and were liabilities to be discharged by the assessee. The Tribunal held that these amounts could not be considered trading receipts and deleted the additions.

2. Addition of Rs. 70,000 as Income from Undisclosed Sources:
During a search, certain transactions were found that were not recorded in the books. The assessee admitted these transactions and offered the amount for disclosure. The Assessing Officer assessed Rs. 70,000 as income from undisclosed sources for the assessment year 1989-90. The CIT(A) upheld this addition. The Tribunal confirmed the addition, stating that the unexplained investment or expenditure should be deemed as income u/s 69, 69B, and 69C, even though it resulted in double taxation.

3. Disallowance of Rs. 13,42,000 u/s 40A(3):
The assessee admitted to paying Rs. 13,42,000 in cash to M/s. Mehta Construction Co., which was not recorded in the books. The Assessing Officer disallowed this amount u/s 40A(3) due to non-compliance with the requirement of payment by crossed cheque or bank draft. The CIT(A) upheld this disallowance. However, the Tribunal, by majority opinion, held that the payment was genuine and covered by exceptional circumstances under rule 6DD(j). Therefore, the disallowance was deleted.

4. Disallowance of Rs. 6,13,000 on Account of Defective Vouchers:
During the search, defective and unsigned vouchers were found. The assessee declared Rs. 6,13,000 as income under section 132(4) but also claimed it as an expenditure. The Assessing Officer disallowed the claim, and the CIT(A) confirmed it. The Tribunal allowed the deduction, stating that the declaration had a direct nexus with the expenditure and the department could not turn around to disallow the claim after accepting the income.

5. Addition of Rs. 50,000 as Unexplained Cash Credits:
The assessee received loans from five persons, which were not substantiated with confirmations or bank passbooks. The Assessing Officer added Rs. 50,000 as unexplained cash credits, and the CIT(A) upheld this addition. The Tribunal confirmed the addition, stating that the assessee failed to establish the capacity and genuineness of the transactions.