2003 (12) TMI 283 - AT - Income Tax

Addition on account of investment - Expenses incurred by assessee on foreign tour - Bogus declaration in VDIS - HELD THAT - Neither any material was brought on record that on what basis the addition has been made by the AO. Though a copy of account is placed in the paper book but nowhere the name of the assessee is appearing in that paper. Therefore without any basis and without raising any specific query the addition of Rs. 23, 75, 000 made by the AO was not justified and the CIT(A) was also not justified in sustaining the part addition of Rs. 15, 25, 000. If any adverse inference was to be drawn that could have been drawn in the case of Saharanpur Associates and not in case of assessee because the onus lay upon the person from whose possession the alleged paper was found. If any unexplained credit appearing in the name of any person in the books of such person then the adverse inference can be drawn against such person u/s 68. Therefore no addition can be made u/s 69 against such person i.e. assessee. Neither the copy of document on which basis the additions were made of Rs. 15, 25, 000 was confronted to the assessee nor any other material was brought on record which suggests that there was direct nexus between the entry credited in the books of accounts of Saharanpur Associates with the evidence found from the possession of the assessee. Therefore in view of these facts and circumstances we delete the addition of Rs. 15, 25, 000 sustained by the CIT(A). Expenses incurred by assessee on foreign tour - The CIT(A) after ascertaining the fact that the expenses on stay were borne by Shri Atul Gupta who asked the assessee to visit South Africa for purpose of supply of computers. Therefore the expenditure incurred on stay for 18 days was deleted by the CIT(A). However he sustained the addition of Rs. 18, 000 on account of stay atSingaporeand on account of tickets at Rs. 27, 000 (Rs. 50, 000 total cost of ticket minus Rs. 23, 000 withdrawals shown from Patni Chemicals). In this way an addition of Rs. 45, 000 was sustained. No plausible explanation could be filed on behalf of the assessee during the course of hearing. Therefore in view of the reasoning given by CIT(A) we confirm this addition. Bogus declaration in VDIS - It was held by the CIT(A) that the VDIS declared in the name of wife of the assessee was duly accepted by the Department. Therefore there was no point in making any addition in the hands of the assessee. The CIT(A) has also observed in his order that Shri Y.P.B. Singh who appeared on behalf of Department also could not rebut the evidence in regard to VDIS. After considering the above finding of CIT(A) and the order of the AO we do not find any infirmity in the findings of the CIT(A) as findings of the CIT(A) neither could be controverted nor any material was brought on record as to how the jewellery disclosed under VDIS was bogus. Therefore in view of the reasoning given by the CIT(A) we confirm his order on this issue also. In the result the appeal of the assessee is allowed in part. The cross-objection of the assessee is dismissed and the appeal of the Department is dismissed.

Summary

Issues Involved:
1. Legality of provisions of s. 132(1) while completing assessment u/s 158BC.
2. Addition on account of income from dealing in property.
3. Addition on account of investment in construction of house property.
4. Addition on account of investment made by assessee in Saharanpur Associates.
5. Addition on account of investment in household appliances.
6. Addition on account of expenses incurred on foreign tour.
7. Addition on account of NRI gifts.
8. Addition on account of capital gain on sale of shares.
9. Addition on account of diversion of income in the name of wife.
10. Addition on account of bogus declaration in VDIS in the name of wife.
11. Addition on account of gifts received by minor children.
12. Addition on account of income and investment in moneylending business.
13. Addition on account of undisclosed investment in purchase of property Thrill Hotels (P) Ltd.

Summary:

1. Legality of provisions of s. 132(1) while completing assessment u/s 158BC:
The cross-objection filed by the assessee challenging the legality of provisions of s. 132(1) was not pressed by the counsel of the assessee. Therefore, the cross-objection was dismissed.

2. Addition on account of income from dealing in property:
Ground No. 1 in assessee's appeal against upholding the addition of Rs. 38,312 on account of income from dealing in property was not pressed by the counsel of the assessee during the course of hearing. Therefore, the same is dismissed as not pressed.

3. Addition on account of investment in construction of house property:
The lower authorities were not justified in making this addition as no material was found during the course of search to establish that the assessee had not shown the investment in house property properly. The Supreme Court has held that the AO was not empowered to refer the matter to the Departmental Valuation Officer u/s 131(1)(d) in the case of Amiya Bala Paul vs. CIT. Therefore, the addition was deleted.

4. Addition on account of investment made by assessee in Saharanpur Associates:
The CIT(A) sustained an addition of Rs. 15,25,000 out of the total addition of Rs. 23,75,000 made by the AO. However, it was found that no material was brought on record to establish that the assessee had made the deposit with Saharanpur Associates. Therefore, the addition of Rs. 15,25,000 was deleted.

5. Addition on account of investment in household appliances:
The AO made an addition of Rs. 2 lakhs on account of household appliances, which was reduced to Rs. 1 lakh by the CIT(A). The inventory of household appliances was prepared during the course of search, and the assessee could not explain the items purchased during the block period properly. Therefore, the addition of Rs. 1 lakh was sustained.

6. Addition on account of expenses incurred on foreign tour:
The AO made an addition of Rs. 99,000 on account of expenses incurred on a foreign tour. The CIT(A) reduced the addition to Rs. 45,000 after ascertaining that the expenses on stay were borne by Shri Atul Gupta. The addition of Rs. 45,000 was confirmed.

7. Addition on account of NRI gifts:
The AO made an addition of Rs. 20 lakhs on account of NRI gifts, which was deleted by the CIT(A) as the gifts were duly disclosed in the regular return of income. The CIT(A) relied on Explanation B & C inserted by Finance (No. 2) Act, 1998. The deletion of the addition was confirmed.

8. Addition on account of capital gain on sale of shares:
The AO made an addition of Rs. 10,11,885 on account of capital gain on sale of shares, which was deleted by the CIT(A) as the capital gain was duly shown in the regular return for the assessment year 1992-93. The deletion of the addition was confirmed.

9. Addition on account of diversion of income in the name of wife:
The AO made an addition of Rs. 4,37,569 on account of diversion of income in the name of the assessee's wife, Smt. Parul Goyal. The CIT(A) deleted the addition as the income was already declared by her in her regular return. The deletion of the addition was confirmed.

10. Addition on account of bogus declaration in VDIS in the name of wife:
The AO made an addition of Rs. 18,57,038 on account of bogus declaration in VDIS in the name of the assessee's wife. The CIT