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2014 (11) TMI 565 - HC - Income TaxOpening cash balance - Whether the AO relied upon any material other than what was found in the course of search or proceedings thereafter to come to the conclusion that the sum of ₹ 2,50,000/- alone should be shown as opening cash balance and other amount should be treated as undisclosed income – Held that:- the provision of Section 158BB of the Act is in relation to computation of undisclosed income for the block period and that is to be done in accordance with the provisions of the Act on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials of information as are available with the AO and relatable to such evidence - for drawing this inference the AO has stated that some expenditure should be allowable for the previous years - the assessee admitted that there is a drawing of certain amount during every block year as the assessee cannot claim that there was no drawing at all prior to the block assessment period 1989-1990. The amount fixed as opening cash balance is based on no material itself cannot be countenanced, because the cash flow statement of the assessee is a record which speaks for itself - Nothing more is required for the AO in the course of search to determine the opening cash balance and for computation of the undisclosed income for the block period - The cash flow statement is a piece of evidence before the AO given at the behest of the assessee and that material has been considered to compute the undisclosed income - The emphasis of Section 158BB of the Act is on computation of undisclosed income and for that necessary materials can be taken into consideration and one such material is the cash flow statement and the inference by the AO appears to be justified – as decided in VENGAT BAVA Versus COMMISSIONER OF INCOME-TAX [2008 (6) TMI 208 - KERALA HIGH COURT] – when assessment is based on the materials gathered on inspection which showed proof of investment in landed properties and expenditure in the course of time under various heads, addition u/s 68 and 69 of the Act is permitted in an assessment u/s 158BB read with Section 158BC of the Act – Decided against assessee. Remodeling of house at No.15-b, Gokalay Road – Held that:- The AO was of the view that ₹ 7,00,000/- has been expended towards renovation of the house and ₹ 3,50,000/- was claimed towards cost of material - That was accepted to some extent, except for ₹ 90,000 - Therefore, the onus would rest on the assessee to show as to how the sum of ₹ 90,000/- was received by him either in kind or in value - There being no material to substantiate that, the mere statement of the assessee is of no avail and the department was justified in treating the balance amount of ₹ 85,000/- as undisclosed income, giving exemption to the extent of ₹ 5,000/- as per Section 10(3) of the Act – Decided against assessee. Bad debts written of – Held that:- The AO rejected the plea of the assessee to treat ₹ 3,50,000/- as bad debt by holding that the same can only be treated as investment in money lending in the year of giving and it is not a bad debt - The reasoning given by the AO and the finding of the Tribunal based on Section 36(2) of the Act are on two independent interpretations of the same issue - there appears to be an issue in relation to the applicability of Section 36(2) of the Act, which should be considered by the AO - Decided against assessee.
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