1994 (12) TMI 341 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 51,000 as unaccounted receipt.
2. Deletion of Rs. 2,25,000 addition made by the AO.
3. Deduction of Rs. 74,372 on account of salaries paid to various employees and 1/3rd of manager's salary.

Detailed Analysis:

1. Addition of Rs. 51,000 as Unaccounted Receipt:
The assessee appealed against the confirmation of Rs. 51,000 as unaccounted receipt. The AO had noted that during the relevant accounting period, new tenants had moved into the property owned by the assessee-company. Upon examination, two tenants admitted to paying "pagree" (an informal fee), while others denied it. The AO concluded that pagree was paid in all cases except two, leading to an addition of Rs. 2,76,000.

On appeal, the CIT(A) deleted most of the additions but sustained Rs. 51,000 based on the statements of two tenants, Shri Dalip Kumar and Mrs. Parveen Begum. The assessee argued that these statements were unreliable and motivated by malice or recorded without cross-examination.

The Tribunal, considering the lack of evidence and the precedent of the Tribunal's earlier orders for the assessee, deleted the Rs. 51,000 addition. It held that the statements recorded without cross-examination (Mrs. Parveen Begum) should be excluded, and there was no basis for assuming the payment of Rs. 22,000 by Shri Dalip Kumar.

2. Deletion of Rs. 2,25,000 Addition Made by the AO:
The Department cross-appealed against the deletion of Rs. 2,25,000 by the CIT(A), which was added by the AO on the assumption of pagree payments. The CIT(A) had deleted this addition, finding no substantial evidence to support the AO's claim.

The Tribunal upheld the CIT(A)'s decision, stating that the additions were made on mere suspicion and conjecture without any concrete evidence. The Tribunal emphasized that such assumptions could not form the basis for income addition.

3. Deduction of Rs. 74,372 on Account of Salaries Paid to Various Employees and 1/3rd of Manager's Salary:
The Department also contested the CIT(A)'s direction to allow the deduction of Rs. 74,372 for salaries paid to watchmen, sweepers, malis, pump operators, and 1/3rd of the manager's salary. The AO had not mentioned these expenses in the assessment order, but the CIT(A) allowed them based on past practice and Tribunal orders for earlier years.

The Tribunal agreed with the CIT(A) for consistency, despite the Departmental Representative's argument that such deductions are not allowable under current provisions. The Tribunal noted that these deductions had been consistently allowed in the past and should continue to maintain consistency.

Conclusion:
- The Tribunal deleted the Rs. 51,000 addition sustained by the CIT(A) due to lack of evidence and improper reliance on uncorroborated statements.
- The deletion of Rs. 2,25,000 by the CIT(A) was upheld as the addition was based on conjecture without evidence.
- The deduction of Rs. 74,372 for salaries and 1/3rd of the manager's salary was upheld to maintain consistency with past assessments.