1981 (2) TMI 99 - AT - Income Tax

Summary

Issues:
1. Rejection of trading results under Section 145 of the IT Act for asst. yrs. 1975-76 and 1976-77.
2. Addition to interest income from money lending business.
3. Addition to total income for asst. yr. 1975-76 regarding a loan for house construction.

Analysis:

Issue 1:
The appeals dealt with the rejection of trading results under Section 145 of the IT Act for the assessment years 1975-76 and 1976-77. The assessee argued that the results were consistent with past history and should not have been questioned. The gross profit rates declared were compared to previous years, showing no significant deviation. The ITAT held that the additions made were unwarranted, considering the past history and upheld the assessee's contentions, deleting the additions.

Issue 2:
Regarding the addition to interest income from the money lending business, the authorities had added Rs. 1,000 based on the belief that the transactions were not verifiable. The assessee contended that proper books were maintained and challenged the authorities' assertion. The ITAT found no concrete evidence supporting the authorities' claim and deleted the additions for both years, emphasizing the obligation of a licensed money lender to maintain proper accounts.

Issue 3:
In the case of the addition to total income for the assessment year 1975-76 related to a loan for house construction, the authorities questioned the genuineness of the loan despite documentation provided by the lender. The ITAT examined the period of construction based on a valuer's report and found discrepancies in the ITO's findings. The matter was remanded to the ITO for further examination to determine the construction period and any unexplained investments, with a directive to redetermine the addition if necessary.

In conclusion, the ITAT allowed the appeal for the assessment year 1976-77 and partly allowed the appeal for the assessment year 1975-76, deleting the additions made to the trading results, interest income, and total income related to the loan for house construction. The judgment emphasized the importance of considering past history, maintaining proper records, and ensuring findings are based on concrete evidence in tax assessments.