COMMISSIONER OF INCOME TAX Vs. VIKAS POLYMERS

JUDGEMENT

(1.) By this reference under Section 256(1) of the Income-tax Act, 1961 ("the Act"), the Income-tax Appellate Tribunal ("the Tribunal") has referred the following question of law at the instance of the revenue:

(2.) This reference relates to the Assessment Year 1982-83. Assessment for the aforesaid year was completed by the ITO on 19.09.1984 on a total income of Rs. 90,031/- as against the returned income of Rs. 69,500/-. On going through the assessment records of the assessee, the Commissioner of Income-tax served a notice on the assessee dated 17.03.1987, stating therein that while completing the assessment the Income-tax Officer did not inquire into the genuineness of the capital investments of the two partners, Smt. Ratni Dvi and Shri Sagar Mal Bardie for the sums of Rs. 49,000/- and Rs. 40,000/- respectively, and unsecured loans of Rs. 98,500/- taken from M/s. Stutee Chit & Finance (P) Ltd. The Commissioner of Income-tax also observed in the second para of the said notice that no examination of accounts in respect of manufacturing account was done by the ITO. It was further observed that the assessee had shown the previous year ending on 30.06.1980, but for assessment year 1982-83, the account books appeared to have been closed on 30th March, 1982. It was further observed:

(3.) The assessee furnished reply to the aforesaid show-cause notice vide its detailed communication dated 21st March, 1987 justifying the order passed by the Income-tax Officer and challenging the initiation of proceedings under Section 263 of the Act itself. The assessee, inter alia, pointed out that in respect of Smt. Ratni Devi the deposit was of Rs. 29,000/- and not of Rs. 49,000/-. Both the partners were assesses and the amounts invested by them were invested after withdrawal from their bank accounts. The investment of Rs. 29,000/- was explained to the Income-tax Officer as follows: <FRM>JUDGEMENT_326_LAWS(DLH)8_2010_1.html</FRM>