2007 (9) TMI 129 - HC - Income Tax

Block assessment - Revenue made addition in the total income of assessee in respect of the undisclosed income - Tribunal rejected the addition for which reasonable explanation provided by the assessee and remanded the other matter for which there was not enough evidence

Summary

Issues Involved:

1. Additions made on account of money received by the assessee from persons seeking mining licenses from TAMIN.
2. Cash found in the assessee's office and residential premises.
3. Investments made in the names of the assessee's mother and son.
4. Deposits in the name of Dr. Dharmambal Namasivayam Trust.
5. Costly sarees found during the search.
6. Estimated marriage expenses of the assessee's son.
7. Secret commission received by the assessee from foreign companies for the sale of granite.
8. Foreign currency found in the assessee's house.
9. Fixed deposits in the name of Narayanan.
10. Tribunal's insistence on direct evidence and rejection of circumstantial evidence.

Issue-wise Detailed Analysis:

1. Additions made on account of money received by the assessee from persons seeking mining licenses from TAMIN:
The Tribunal found procedural irregularities and defects in the assessment order, including the lack of opportunity for the assessee to cross-examine the deponents and the absence of corroborative evidence. The Tribunal noted that the Assessing Officer had relied on statements from only 23 out of 994 applicants without further verification. The Tribunal concluded that the assessment was made without proper enquiry and remitted the matter to the Assessing Officer for further investigation.

2. Cash found in the assessee's office and residential premises:
The Tribunal accepted the assessee's explanation that the cash belonged to the Tamil Nadu Basketball Association (TNBA) and was collected for infrastructure facilities for the stadium. The Tribunal noted that the TNBA had filed its return, including the seized amount, which was accepted by the Department. The Tribunal found that the assessee had discharged the primary onus of proving the identity, capacity, and genuineness of the sources and deleted the addition.

3. Investments made in the names of the assessee's mother and son:
The Tribunal found that the investments in the names of the assessee's mother and son had already been declared under the Kar Vivad Samadhan Scheme and assessed on a regular basis. The Tribunal held that the Revenue was wrong in adding these amounts as undisclosed income in the hands of the assessee and deleted the addition.

4. Deposits in the name of Dr. Dharmambal Namasivayam Trust:
The Tribunal noted that the Trust is a separate juristic person and that the donations were accounted for in its books. The Tribunal found no direct involvement of the assessee and no evidence of repayment by the assessee to the donors. The Tribunal deleted the addition, holding that any consequences of violations should visit the Trust, not the assessee.

5. Costly sarees found during the search:
The Tribunal accepted the explanation that the sarees were gifts received during the marriage of the assessee's son and noted the absence of any evidence directly linking the assessee to the acquisition of the sarees. The Tribunal deleted the addition.

6. Estimated marriage expenses of the assessee's son:
The Tribunal accepted the explanations provided, including the affidavit from the assessee's mother and the statement from the assessee's son. The Tribunal found that the addition was purely a guesswork and deleted it.

7. Secret commission received by the assessee from foreign companies for the sale of granite:
The Tribunal found that the Assessing Officer had not provided any evidence of how the amounts were received by the assessee and noted the absence of corroborative evidence. The Tribunal deleted the addition, holding that the presence of certain documents in the assessee's briefcase was not sufficient to prove receipt of secret commissions.

8. Foreign currency found in the assessee's house:
The Tribunal accepted the explanation that the foreign currency belonged to Mrs. Seethalakshmi Nagaraj, a family friend, and noted her sworn statement before the Enforcement Directorate. The Tribunal found no evidence to prove that the currency belonged to the assessee and deleted the addition.

9. Fixed deposits in the name of Narayanan:
The Tribunal accepted the explanation provided by Narayanan and noted that he had settled the matter under the Kar Vivad Samadhan Scheme. The Tribunal deleted the addition, holding that the fixed deposits could not be included in the hands of the assessee.

10. Tribunal's insistence on direct evidence and rejection of circumstantial evidence:
The Tribunal deleted the additions based on valid materials and evidence, not on technical grounds. The Tribunal's findings were based on factual determinations and were not perverse. The question was deemed academic and did not require further consideration.

Summary:

- Question No.1: Remitted to the Assessing Officer with observations.
- Question Nos.2 to 10: Answered in favor of the assessee.
- Question No.11: Deemed academic and not considered further.

The Tax Case was partly allowed, and T.C.M.P.No.118 of 2005 was closed with no costs.