1994 (3) TMI 126 - AT - Income Tax

A Firm Assessing Officer Assessment Year Business Premises Business Transactions Income Tax Authorities

Summary

Issues Involved:

1. Addition of Rs. 6 lakhs under Section 69 of the Income Tax Act.
2. Confirmation of Rs. 15,000 towards low Gross Profit (G.P.).

Detailed Analysis:

1. Addition of Rs. 6 Lakhs under Section 69 of the Income Tax Act:

The revenue's appeal contested the deletion of an addition of Rs. 6 lakhs made by the Assessing Officer (A.O.) under Section 69 of the Income Tax Act. This addition was based on a search operation conducted on 26-6-1981 at the assessee's premises, where two Banakhatas (agreements to sell) were found. One agreement dated 18-12-1980 showed a consideration of Rs. 11,51,000 for a shop, while another dated 19-12-1980 showed Rs. 2,50,000. The A.O. considered the difference of Rs. 9,26,000 as unexplained investment and added Rs. 6,00,000 for the financial year 1980-81.

The Appellate Commissioner (A.C.) deleted this addition, concluding that the document dated 18-12-1980 was not genuine and that the shop was purchased for Rs. 2,50,000 as per the document dated 19-12-1980. The A.C. found no valid evidence to support the addition under Section 69.

The Tribunal upheld the A.C.'s decision, noting several key points:

- The A.O. relied heavily on the statement given by the assessee on the search day, which was incoherent and at variance with subsequent statements. The Tribunal emphasized that statements made under mental stress during search operations should be viewed with caution.
- The A.O. did not summon or verify the vendor-firm's books of account on the search day. The books were only impounded after a fortnight, allowing the vendor-firm time to potentially fabricate entries.
- The Tribunal found no evidence that the vendor-firm had goodwill worth Rs. 9,26,000 to transfer. The vendor-firm's claim of receiving Rs. 9,26,000 for goodwill was not accepted by its own assessing officer.
- The Tribunal noted the improbability of the vendor-firm executing an agreement for Rs. 2,50,000 on 19-12-1980 without securing the alleged extra payment of Rs. 9,26,000.
- The Tribunal directed the Departmental Representative (D.R.) to produce the vendor-firm's impounded books, financial state, balance-sheet, wealth-tax assessments, and prosecution case details. The D.R. failed to provide this information, leading the Tribunal to draw an inference in favor of the assessee.

The Tribunal concluded that the A.O.'s addition was based on presumptions and conjectures, lacking valid evidence. Therefore, the revenue's appeal was dismissed, and the A.C.'s deletion of the Rs. 6,00,000 addition was upheld.

2. Confirmation of Rs. 15,000 towards Low Gross Profit (G.P.):

The assessee's appeal challenged the confirmation of an addition of Rs. 15,000 towards low G.P. The Tribunal heard arguments from both sides and reviewed the A.C.'s reasons for sustaining the addition. The Tribunal agreed with the A.C. and found no reason to interfere with the confirmation of the Rs. 15,000 addition. Consequently, the assessee's appeal was dismissed.

Conclusion:

The Tribunal dismissed both the revenue's appeal regarding the Rs. 6,00,000 addition under Section 69 and the assessee's appeal concerning the Rs. 15,000 addition towards low G.P. The A.C.'s decisions were upheld in both instances.