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2017 (7) TMI 872 - HC - Income TaxUndisclosed income for the purpose of Section 158BD read with Section 158BC - Held that:- As regards the additions made by the AO relating to AYs 1993-94 and 1994-95 as unexplained capital, as already noted for both these AYs the Assessee’s returns were picked up for scrutiny and assessment orders, after inquiry, were initially passed by the AO under Section 143 (3) of the Act. The AO’s impugned order dated 15th November 1996 does not mention any incriminating material recovered during the search that would justify the above addition. What the AO has done is to again examine the Assessee’s books of account and seek further explanation during the course of assessment, which exercise was already undertaken by the AO when the assessments for AYs 1993-94 and 1994-95 were completed originally under Section 143(3) of the Act. In the absence of any incriminating material justifying the same, the Court finds that the impugned order of the ITAT having deleted these additions does not call for any interference. Addition as balance of capital - there is no reference by the AO in the impugned order to any incriminating material. The case of the Revenue is that the original return filed by the Assessee for AY 1986-87 was not accompanied by the balance sheet and therefore, there was no occasion for the AO at that stage to have examined it or raised a query. In any event, the Court finds that the AO has not referred to any incriminating material as such which would justify the additions except by saying that no appropriate justification was shown by the Assessee regarding the opening balance in the capital account. As under Section 158 BB (1) (c) amounts that have been recorded in the books of accounts or other documents on or before the date of search would go to reduce the ‘undisclosed income’. Viewed in the above perspective, the amount balance of capital having already been disclosed in the balance sheet of the Assessee for the AY in question, the deletion of the said addition by the ITAT cannot be faulted. Unexplained cash credits in light of the explanation offered, it was necessary for the AO to have undertaken some inquiries before arriving at the above conclusion. The mere fact of a slip of paper showing bank balances was by itself insufficient for the AO to infer that the Assessee had routed his own money through the said creditors. The addition of such a large sum based on extremely tenuous material cannot be sustained in law. Therefore, the said additions were rightly deleted by the ITAT. The corresponding deletion of the interest amount is also, therefore, justified. Unexplained receipts on account of ‘low household expenses’ for the block period, ₹ 1,63,490 on account of unexplained investment in a plot, ₹ 1,35,746 on account of deposit in the name of Ms. Archana Agarwal, wife of the Assessee and ₹ 2,33,425 on account of unexplained jewellery. The impugned order of the ITAT in regard to the deletion of each of the above additions is a detailed one which analyses the evidence with sufficient clarity. - Decided in favour of the Assessee and against the Revenue.
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