1985 (8) TMI 95 - AT - Income Tax

Tribunal Upholds Decision on Income Tax Appeals, Deems Return Invalid.

The Tribunal dismissed both the assessee's and the Department's appeals, upholding the lower authorities' findings. The return filed on 17th May, 1976, ... - Issues Involved:1. Validity of the return filed on 17th May, 1976.2. Applicability of Section 40A(3) concerning cash transactions.3. Genuineness of the Roznamcha and the transactions recorded therein.4. Additions made by the Income Tax Officer (ITO) to the assessee's income.5. Interest income from advances not charged in the year under appeal.Detailed Analysis:1. Validity of the Return Filed on 17th May, 1976:The primary issue was whether the return filed by the assessee on 17th May, 1976, could be considered valid under Section 139(5) of the Income Tax Act. The assessee argued that this return was a revised one, filed due to the ITO not honoring an agreement. However, the ITO and the CIT (A) both held that the return filed on 28th May, 1975, was under Section 139(4) and could not be revised. The Tribunal upheld this view, citing the Allahabad High Court's ruling in Dr. S. B. Bharagava vs. CIT, which stated that a return under Section 139(4) cannot be revised under Section 139(5). Thus, the return filed on 17th May, 1976, was deemed invalid.2. Applicability of Section 40A(3) Concerning Cash Transactions:The assessee claimed that the purchases of 300 bags of sugar were made in 75 separate transactions, each below Rs. 2,500, to avoid the provisions of another Act, not to circumvent Section 40A(3). The ITO disallowed this, asserting that the Roznamcha was fabricated post-search and that the actual transaction was a single purchase exceeding Rs. 2,500. The CIT (A) partially accepted the assessee's contention about multiple transactions but did not express an opinion on the legal applicability of Section 40A(3) once Section 145 was applied. The Tribunal concluded that there were no real transactions, thus Section 40A(3) did not apply.3. Genuineness of the Roznamcha and the Transactions Recorded Therein:The ITO and CIT (A) questioned the authenticity of the Roznamcha, which was not found during the search. The Tribunal found that the Roznamcha and the transactions recorded therein were manipulated by the assessee's husband. The Tribunal noted that the assessee did not have cash for the purchases, and the transactions were fictitious. Consequently, the Tribunal upheld the deletion of the Rs. 1,08,000 addition made by the ITO, asserting that there were no real transactions.4. Additions Made by the Income Tax Officer (ITO) to the Assessee's Income:The ITO made several additions to the assessee's income, including Rs. 18,000 for inflated purchase prices, Rs. 9,200 for suppressed sales, and Rs. 21,090 for interest income. The CIT (A) deleted some of these additions but maintained others. The Tribunal agreed with the lower authorities that the additions were justified based on the facts. The Tribunal found no merit in the assessee's appeal regarding these additions.5. Interest Income from Advances Not Charged in the Year Under Appeal:The ITO included Rs. 21,090 as interest income that the assessee agreed to during discussions. The CIT (A) upheld this addition. The Tribunal concurred, noting that the assessee had been charging interest in previous years and there was no valid reason for not charging it in the year under appeal.Conclusion:Both the assessee's and the Department's appeals were dismissed. The Tribunal upheld the findings of the lower authorities, confirming that the return filed on 17th May, 1976, was invalid, Section 40A(3) did not apply due to the lack of real transactions, and the additions made by the ITO were justified. The Tribunal's decision was based on a thorough examination of the facts and legal principles involved.