2003 (3) TMI 317 - AT - Income Tax

Issues Involved:

1. Addition to undisclosed income relating to interest from Gomtesh Constructions.
2. Addition to undisclosed income relating to cash gift from Mrs. Pandya.
3. Addition to undisclosed income relating to cash credit from various persons.
4. Addition to undisclosed income relating to cash credit from Mannumiya and Raju Kulkarni.
5. Addition to undisclosed income relating to expenses recorded in seized books without availability of cash.
6. Addition to undisclosed income relating to investment in capital in M/s. Arhat Enterprises.
7. Addition to undisclosed income relating to income from Garima Enterprises.
8. Considering disclosed income as Nil for various assessment years.

Detailed Analysis:

1. Addition to Undisclosed Income Relating to Interest from Gomtesh Constructions:

The Assessing Officer (AO) added interest amounts from Gomtesh Constructions for assessment years 1986-87 to 1991-92 as undisclosed income because the returns were not filed. However, the total income for these years was below the taxable limit. The Tribunal, following the decision in Smt. Sitadevi Daga v. Asstt. CIT, held that no addition could be made as the income was below the taxable limit. Thus, this ground succeeded, and the additions were deleted.

2. Addition to Undisclosed Income Relating to Cash Gift from Mrs. Pandya:

The AO added Rs. 15,000 as undisclosed income for AY 1990-91, claiming it was not properly explained. The assessee provided a letter from Mrs. Pandya confirming the gift. The Tribunal noted a similar issue was resolved in favor of the assessee's brother in a previous case and deleted the addition, finding no justification for it.

3. Addition to Undisclosed Income Relating to Cash Credit from Various Persons:

The AO added Rs. 1,35,000 for AY 1993-94, as the assessee could not produce 11 persons who had given the credits. The assessee later provided affidavits from these persons confirming the credits. The Tribunal found the AO did not give adequate opportunity to the assessee to produce these persons and restored the issue to the AO for verification of the affidavits.

4. Addition to Undisclosed Income Relating to Cash Credit from Mannumiya and Raju Kulkarni:

The AO added Rs. 10,000 for AY 1994-95, questioning the genuineness of the credits despite confirmatory letters from the creditors. The Tribunal held that the assessee had discharged the initial onus by providing the letters, and the AO failed to further verify the creditors. Thus, the addition was deleted.

5. Addition to Undisclosed Income Relating to Expenses Recorded in Seized Books Without Availability of Cash:

The AO added Rs. 50,860 for AY 1994-95, claiming expenses were recorded without cash availability. The assessee argued that job work receipts were not incorporated in the rough books but were in the final cash book. The Tribunal accepted the explanation for most expenses except Rs. 9,010, which was confirmed as an addition. The rest of the addition was deleted.

6. Addition to Undisclosed Income Relating to Investment in Capital in M/s. Arhat Enterprises:

The AO added Rs. 30,000 for AY 1994-95, questioning the source of capital investment. The Tribunal found the actual investment was Rs. 23,000, which was reconciled in the final cash book. Following the facts in a related case, the Tribunal deleted the addition.

7. Addition to Undisclosed Income Relating to Income from Garima Enterprises:

The AO estimated an income of Rs. 12,008 for AY 1995-96, claiming job receipts and expenses were not fully verifiable. The Tribunal found no supporting material from the search to justify the estimate and deleted the addition, citing relevant case law.

8. Considering Disclosed Income as Nil for Various Assessment Years:

For assessment years 1986-87 to 1991-92, the issue was covered by Ground No. 1(a). For AY 1993-94, the Tribunal directed the AO to consider the income as disclosed if it was below the taxable limit after relief. For AY 1995-96, the income was below the taxable limit, and the AO was directed not to take it as undisclosed income.

Separate Judgments:

The Judicial Member disagreed with the Accountant Member on Grounds 1(e) and 1(f) and observations for AY 1993-94. The Judicial Member suggested setting aside these issues for fresh adjudication by the AO. The Third Member, agreeing with the Accountant Member on Grounds 1(e) and 1(f) and with the Judicial Member on Ground No. 2 for AY 1993-94, restored the issue to the AO for fresh consideration. The majority view led to partial allowance of the appeal.

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