Law: Income Tax Act, 1922

Section: 23,23(2),34

Income-tax Act (XI of 1922)---Ss. 23(2) & 34-Undisclosed income--Credits and loans-Assessee failing to prove beyond doubt genuineness of loans--Held, Income--tax Officer fully justified in treating amount of such loan as income from disclosed source. ORDER GHULAM MURTAZA KHAN (MEMBER).--These are three cross-appeals filed by the Department and the assessee-respondent against the combined order of the learned A. A. C. relating to the charge years 1974-75, 1975-76 and 1976-77. The Department's grievance is against the deletion of an amount of Rs. 2,50,000 added being the unexplained investment and the allowance of interest on loans obtained for making the impugned investment. The assessee, on the other hand, has only disputed the disallowance of certain expenses claimed by it. Since the objections arise out of the combined order of the learned A. A. C. all the six appeals are being disposed of by this order. 2. We first take up the Department's appeals assailing the investment of Rs. 2,50,000 through raising loans for the purchase of a barge and the allowance of interest to the alleged creditors. In the original return of income for the charge year 1973-74, the respondent-assessee did not declare any income from a barge let out Messrs R. E. Lightrage Company and assessment was made only on income from salary and bonus etc. The Income-tax Officer, on receipt of information regarding the income from barge, re-opened the assessment under section 34 and the respondent filed a return but instead of disclosing any income from barge, only wrote a note on the return form that the respondent had made a declaration under section 33-C/Vth Schedule of the Income-tax Act, covering the assessment year 1974-75 and hence the notice under section 34 was illegal. The Income-tax Officer, however, initiated proceedings under section 23(2) and noted that the respondent-assessee has entered into an agreement with E. E. Lightrage Company in the month of October, 1973 in respect of hiring of barge, which was purchased from Messrs Falcon Interna­tional (Pakistan) Limited for an amount of Rs. 2,50,000. This amount was paid in two instalments of Rs. 1 lakh on 30th August, 1973 and Rs.…

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