1992 (9) TMI 144 - AT - Income Tax

Tribunal overturns Income Tax Officer's decision, rules in favor of assessee in undisclosed income case

The appeal challenged the addition of Rs. 1,00,000 as income from undisclosed sources by the Income Tax Officer (ITO) for unexplained investments. The ... - Issues:1. Unexplained investment of Rs. 1,00,0002. M/s Saroj International - Whether a benami concern3. Interest under ss. 139(8) and 217 of the ActIssue 1: Unexplained investment of Rs. 1,00,000:The appeal challenged the order of CIT(A) regarding the unexplained investment of Rs. 1,00,000 by the assessee for the assessment year 1985-86. The assessee, an individual deriving income from business, explained cash deposits of Rs. 50,000 each on two separate dates by stating that she received a gift of Rs. 1,00,000 in 1982. The Income Tax Officer (ITO) rejected the explanation, leading to an addition of Rs. 1,00,000 as income from undisclosed sources. In the appeal, it was argued that since the receipt of the gift was undisputed, and no evidence showed alternative utilization of the amount, the assessee's version should be accepted. The Tribunal agreed, emphasizing that the time gap between gift receipt and cash deposits did not prove alternative investment, deleting the addition.Issue 2: M/s Saroj International - Whether a benami concern:The ITO had previously treated the business of M/s Saroj International as a benami business of another entity, resulting in various adjustments. The CIT(A) upheld this decision, linking it to a pending matter with the Settlement Commission. However, the Tribunal, based on a previous order, found that M/s Saroj Textiles was not a benami business and directed the ITO to treat certain amounts as the assessee's income and make adjustments accordingly.Issue 3: Interest under ss. 139(8) and 217 of the Act:Considering the Tribunal's decisions on the first two points, it was directed to recompute the interest under sections 139(8) and 217 of the Income Tax Act. Consequently, the appeal was allowed in favor of the assessee.This judgment highlights the importance of proving the source of funds, the correct treatment of business relationships, and the subsequent adjustments and computations of interest under relevant sections of the Income Tax Act.