RAMESH KUMAR GARG,PANCHKULA vs. INCOME TAX OFFICER, PANCHKULA

The Assessee in its appeal has taken four grounds of appeal.

Vide Ground No. 2, assessee has contested the addition of Rs. 1,81,940/- made by the lower authorities treating the said amount as income from undisclosed sources, rejecting the claim of the assessee that the same was the business income of the assessee.

At the outset the Ld. Counsel for the assessee has submitted that assessee’s wife namely Smt. Rajni Garg was engaged in a very small scale business of trading in Handlooms. The total receipt from the aforesaid business were of Rs. 4 to 5 lacs only, out of which it offered Rs. 1,81,940/- as her business income under section 44AD of the Act. Lower authorities however, made impugned addition observing that the corresponding evidence such as bills and vouchers relating to aforesaid business were not produced. It was therefore treated as unaccounted income of the assessee.

I have considered the rival contentions. The aforesaid income of Rs. 1,81,940/- was offered by the wife of the assessee in the income tax return under section 44AD of the Income TaxAct,1961 (hereinafter referred to as the “Act”). She was not required to maintain books of account as the return was filed under section 44AD of the Act. Considering the very small scale business of total gross receipt of Rs. 4 to 5 Lacs only, it can be assumed that the necessary evidence relating to the business may not have been presumed by her. Under the circumstances I do not find justification on the part of lower authorities

Vide Ground No. 3, the assessee has contested the addition of Rs. 77,332/-, Rs. 4,697/- and Rs. 13,200/- on account of notional interest in respect of interest free advances given by the wife of the assessee.

Ld. Counsel for the Assessee in this respect has submitted that Wife of the assessee had advanced small amount of interest free loans amounting to Rs. 3,50,000/-, Rs. 2,00,000/- and Rs. 3,50,000/- to her near and dear ones. That the aforesaid loan was advanced out of interest free funds available with the wife of the assessee. He in this respect also invited my attention to the impugned order of the Ld. CIT(A) to submit that the only reason given for aforesaid addition / disallowance was due to the fact that the assessee had not filed regular return of income.

I find that the Ld. CIT(A) himself has mentioned that the assessee had also received interest free advances from some concerns. The amount of Rs. 3,50,000/-, Rs. 2,00,000/- and Rs. 3,50,000/- was advanced by Wife of the assessee to near and dear ones. I therefore do not find justification on the part of lower authorities in making the impugned addition and the same is ordered to be deleted.

Ground No. 4 is general in nature.

In view of my findings given above, the additions made / confirmed by the Ld. CIT(A) are ordered to be deleted.