2006 (4) TMI 530 - AT - Income Tax

Summary

Issues Involved:
1. Addition of loan amount as unexplained cash credit under section 68 during block assessment.
2. Addition of interest payment on loans as unexplained cash credit under section 68 during block assessment.
3. Failure to take a telescopic view of debit and credit entries in computation of undisclosed income.
4. Denial of relief for unexplained jewellery acquired before the block period.

Issue-wise Detailed Analysis:

1. Addition of Loan Amount as Unexplained Cash Credit:
The assessee contested the addition of Rs. 41,72,986 as unexplained cash credit under section 68, arguing that the loans were disclosed in regular books of account and were not found as a result of the search. The Tribunal noted that the books of accounts were regularly maintained and the loans were disclosed in the returns filed under section 139(4). The Tribunal emphasized that the definition of "undisclosed income" under section 158B(b) includes income that has not been or would not have been disclosed for the purpose of the Act. Since the loans were part of the regular books and disclosed in returns, they could not be treated as undisclosed income. The Tribunal cited several judgments supporting this view, including *CIT v. Ashok Taksali* and *Smt. Sita Devi Daga v. Asstt. CIT*. Consequently, the Tribunal directed the deletion of the addition.

2. Addition of Interest Payment on Loans:
The assessee also contested the addition of Rs. 5,05,632 as interest payment on the loans, arguing that it was part of the regular books of account. The Tribunal found that since the principal amount of the loans was not considered undisclosed income, the interest payment on these loans could not be treated as undisclosed income either. The Tribunal directed the deletion of this addition as well.

3. Telescopic View of Debit and Credit Entries:
The assessee argued that the Assessing Officer failed to take a telescopic view of debit and credit entries. The Tribunal noted that the entries were part of the regular books of account and were disclosed in the returns filed under section 139(4). Since these entries were not considered undisclosed income, there was no need for a telescopic view. The Tribunal upheld the assessee's contention.

4. Relief for Unexplained Jewellery Acquired Before Block Period:
The assessee sought relief for Rs. 3,66,609 worth of jewellery, arguing it was acquired before the block period and was not seized during the search. The Tribunal noted that the CBDT Instruction No. 288/63/93-IT (Inv.)II dated 11-5-1994 allows for a certain amount of jewellery to be considered customary and not seized. The Tribunal found that the jewellery in question fell within this permissible limit and directed the Assessing Officer to re-compute the unexplained investment in jewellery after allowing a credit of 1500 grams.

Conclusion:
The Tribunal allowed the appeal partly, directing the deletion of additions related to loans and interest payments and providing relief for the unexplained jewellery. The Tribunal emphasized that income disclosed in regular books of account and filed under section 139(4) cannot be treated as undisclosed income for the block period.