1981 (1) TMI 144 - AT - Income Tax

Appeal partially allowed, income adjustment based on explanations. Importance of evaluating factors in income legitimacy.

The Judicial Member partially allowed the appeal, adjusting the addition of income from undisclosed sources. The assessee's explanations regarding past ... - Issues:Appeal against addition of income from undisclosed sources.Analysis:The appeal was filed against the addition of Rs. 23,308 as income from undisclosed sources by the Assessing Officer (AO) and upheld by the Appellate Authority Commissioner (AAC). The AO observed discrepancies in the cost calculations related to the construction of an ancestral house and the purchase of a building by the assessee. The AO questioned the source of investment in these properties, to which the assessee provided explanations based on savings and capital from previous years. However, the AO did not accept the explanations and added back the amount as undisclosed income.Upon hearing both parties, the Judicial Member (JM) noted that the assessee had shown capital and savings in previous years, which could explain the investments made in the properties under question. The JM highlighted that the authorities did not consider the availability of stock amounting to Rs. 16,000, which was supported by the assessee's claims for the relevant year. The JM also pointed out the earnings disclosed by the assessee in previous years, indicating a source of income. Considering these factors, the JM decided to sustain an addition of Rs. 7,000 as income from undisclosed sources, reducing the original amount added by the AO.In conclusion, the appeal by the assessee was partly allowed, with the JM making adjustments to the addition of income from undisclosed sources based on the explanations and supporting evidence provided by the assessee. The decision highlighted the importance of considering all relevant factors, including past savings, earnings, and stock availability, in determining the legitimacy of investments and sources of income.