1981 (8) TMI 119 - AT - Income Tax

Summary

Issues:
Appeal against deletion of addition of Rs. 12,000 as income from undisclosed sources.

Detailed Analysis:
The appeal by the Revenue in this case pertains to the assessment year 1978-79 and challenges the deletion of an addition of Rs. 12,000 made by the Income Tax Officer (ITO) as income from undisclosed sources. The key contention revolves around 12 high denomination notes of Rs. 1,000 each declared by the assessee to the Punjab National Bank, Industrial Estate, Kota, which the ITO deemed unexplained. The ITO based his decision on various financial transactions and balances, including cash transfers and withdrawals, to assert that the source of the high denomination notes was not proven by the assessee.

The ITO's observations highlighted discrepancies in the cash balances and transactions of the assessee, particularly regarding the absence of high denomination notes in the cash balance available with the assessee. Despite the assessee's explanations about converting notes from cash and transactions with the bank, the ITO remained unconvinced due to lack of specific details and supporting evidence. Consequently, the ITO treated the unexplained high denomination notes as income from undisclosed sources.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's contentions and deleted the addition. The CIT(A) reasoned that it was plausible for the assessee to have received high denomination notes as sale proceeds, considering the turnover and business operations. The CIT(A) emphasized that the non-maintenance of separate details for high denomination notes did not warrant adverse inferences, especially given the regular turnover and business activities of the assessee.

The Revenue, dissatisfied with the CIT(A)'s decision, appealed to the Appellate Tribunal. During the Tribunal proceedings, the arguments from both sides reiterated the positions taken earlier. The assessee's counsel emphasized the regular receipt of high denomination notes during business transactions and presented additional evidence of sales transactions to support the claim. The Tribunal, after careful consideration, upheld the CIT(A)'s decision, emphasizing that the assessee had adequately explained the source of the high denomination notes and that there was no justification for treating them as undisclosed income.

In conclusion, the Tribunal dismissed the appeal by the Revenue, affirming the deletion of the addition of Rs. 12,000 as income from undisclosed sources. The decision rested on the Tribunal's agreement with the assessee's explanations and the absence of concrete evidence to refute the legitimacy of the high denomination notes received during business operations.