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TMI Blog1977 (12) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year. But the assessee pleaded that due to time-lag and increase in the cost of materials and labour the profitability of this contract had come down. The Income-tax Officer was of the opinion that there was some force in this contention but he did not agree that the profit could have gone down very much since cement was supplied free of cost by the contracting department. He, therefore, estimated the profit from this contract at Rs. 25,000 and applied the net-profit rate of 9 per cent, thus making an addition of Rs. 6,422. The assessee appealed to the AAC who confirmed this addition holding that in view of other comparable cases, the estimate made by the Income-tax Officer was reasonable. 4. In the appeal before us, it was contended on behalf of the assessee that there were really no comparable cases and the explanation of the assessee for the fall in the profit having been found to be correct, there was no justification for making the addition. On the other hand, it was contended on behalf of the Revenue that the books of the assessee were incomplete since there was no register for consumption of materials and, therefore, the Income-tax Officer was justified in reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of these persons were not credible and were entirely imaginary. He was of the view that the witnesses gave tutored statements to benefit the assessee, and, therefore, the explanation of the assessee that the money was carried by them to Calcutta was false. He then set off the expenditure incurred at Calcutta against the money taken by the assessee himself or by his son or by cheques or drafts and found that at different periods of time different amounts of expenditure remained unexplained with reference to the funds available for such expenditure. He further found that the largest of such unexplained expenditure was the sum of Rs. 97,127. He was of the view that this amount was the unaccounted income of the assessee from undisclosed sources and, therefore, added this amount to the total income of the assessee. 7. On appeal, the AAC agreed with the assessee that adverse inference need not be drawn only because of minor contradictions in the evidence of the witnesses, but, at the same time, he was of the view that such contradictions gave rise to suspicion. He, therefore, shared the view of the Income-tax Officer that the explanation of the assessee that the amounts were take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord of the entrustment of the money to those people and they had also shown themselves to be tutored by giving precise details of occurrences which took place several years earlier. It was submitted that in the circumstances even if the assessee had shown that he had money available at Tinsukia, there was no proof of that money having come to Calcutta to meet the expenditure there and the necessary implication was that the expenditure at Calcutta was met with undisclosed income of the assessee. It was submitted that in the circumstances, the addition was justified and should be upheld. 10. On a careful consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed on this point also. The Income-tax Officer has examined what is called Hawlati account of the assessee. This account is in fact an imprest account showing the amounts advanced to the assessee for meeting certain expenditure of the business and the receipt of the balance refunded by the assessee after the expenditure was met. The Income-tax Officer does not dispute any of the entries in this account and it is accepted that the amounts were withdrawn from the business for meeting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em from their confirmation of the fact that they carried the money of the assessee from Tinsukia to Calcutta. Nor has the Income-tax Officer brought any evidence to disprove the statement of the witnesses. Therefore, the case of the Revenue rests solely on the alleged discrepancies in the statements. 12. The explanation of the assessee with regard to the discrepancies can now be considered. With regard to Kantilal Jitani who claimed that he delivered the packet of money at 8.30 p.m. the Income-tax Officer states that the assessee had in his deposition stated that it was collected in the evening. The assessee explains that it was a minor discrepancy due to terminological inexactitute. With regard to R.K. Kalra who claimed to have delivered the packets at Airport, the criticism of the Income-tax Officer is that it was not a safe place in those days of unrest. The second discrepancy pointed out is that Sri Kalra stated that the son of the assessee gave him the money while the assessee claimed that the money was given through one Purushatum Lath; the explanation of the assessee is that Purushattam Lath was a mediator when the money was handed over. With regard to M. Moosa, the critic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd were not at all material to the substantial question whether these people really carried the money of the assessee from Tinsukia to Calcutta. As pointed out by the assessee, many of these discrepancies were capable of being fully explained but no opportunity was given to the assessee as these were relied on only in the assessment order and the Income-tax Officer also did not put them to the witnesses. We are of the opinion that these discrepancies have to be ignored and the testimony of these witnesses have to be considered from the point of view of probabilities than from the point of view of any diversity in the circumstances in which substantial evidence is related. 13. According to the Income-tax Officer the claim of the assessee that the packets of money were given to several passengers for being carried to Calcutta and delivered to him was incredible because it was improbable that they would have accepted the packets of large sums without counting the money, that there was no noting with regard to the entrustment of the money to them in the account of the assessee, that the withdrawals are not made on the dates of travel, that they had not opened the packages and counted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta, it would not follow as a matter of course that the assessee had income from undisclosed sources. The Income-tax Officer appears to have laboured on an ill-conceived supposition that if he proves that these several persons did not bring the money, it would lead to an automatic inference that the assessee had undisclosed income to meet his expenditure at Calcutta and thus failed to bring on record any material to indicate the existence of undisclosed income. For one thing, there can be 101 other possibilities as to how the assessee was able to meet the expenditure at Calcutta. To take one instance which immediately strikes one s mind, the assessee could have raised short term finance until the funds withdrawn at Tinsukia reached him otherwise, or it has not been proved that the money withdrawn at Tinsukia was never utilised by the assessee for meeting the expenditure at Calcutta nor is it shown that the money withdrawn at Tinsukia was required by the assessee to meet any other need and was thus not available at all. Even otherwise, the rejection of the assessee's explanation that he brought the money withdrawn at Tinsukia to Calcutta, cannot by itself lead to an inference t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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