1998 (1) TMI 526 - AT - Income Tax

Tribunal upholds assessment order timing, restricts ad hoc additions, and rules on varied heads of appeal

Harakchand N. Jain Versus Assistant Commissioner of Income-Tax

The Tribunal held that the assessment order was passed within the prescribed time-limit. It found that a speaking order was indeed passed and served ... - Issues Involved:1. Time-limit for passing the assessment order.2. Validity of the speaking order.3. Assessment of undisclosed income.4. Additions on account of various heads including jewellery, personal withdrawals, unexplained cash credits, investment in immovable property, understatement of saleable area, and excess receipt in a project.Summary of Judgment:1. Time-limit for Passing the Assessment Order:The first issue raised was whether the assessment order was passed within the prescribed time-limit u/s 158BE. The assessee argued that the order should have been passed on 27th Feb 1997, while it was passed on 28th Feb 1997. The Tribunal held that the time-limit for completion of the block assessment is within one year from the end of the month in which the last of the authorisation for search was executed. The order passed on 28th Feb 1997 was within the time-limit.2. Validity of the Speaking Order:The assessee contended that the AO did not pass a speaking order on 28th Feb 1997 but only a computation sheet was served. The Tribunal found no substance in the assessee's contention, noting that the computation sheet would only be prepared after considering all facts. The affidavit of the assessee indicated that the order was served at midnight between 28th Feb and 1st March 1997. The Tribunal concluded that the speaking order was indeed passed and served within the time-limit.3. Assessment of Undisclosed Income:The Tribunal discussed the scope and implications of Chapter XIVB of the Act, which deals with the assessment of undisclosed income. It was held that the AO must correlate the evidence or material found during the search with the regular assessments. No ad hoc additions can be made merely on the basis of presumption or hypothesis. The Tribunal agreed with the finding that Chapter XIVB does not give unfettered powers to the AO to review assessments already completed unless there is direct evidence that the assessee had not disclosed any income.4. Additions on Various Heads:- Jewellery: The AO made an addition for 926 gms of gold jewellery. The Tribunal allowed further rebate of 500 gms considering Indian customs and practices, treating the balance 426 gms as unexplained.- Personal Withdrawals: The AO's estimation of withdrawals for personal expenses was upheld, as the assessee did not provide any explanation for low withdrawals.- Unexplained Cash Credits: Various additions on account of unexplained cash credits were discussed year-wise. The Tribunal found that the assessee had proved the identity, creditworthiness, and genuineness of the transactions. Additions were deleted where the AO failed to bring any evidence to prove the cash credits as bogus.- Investment in Immovable Property: The Tribunal upheld the addition of Rs. 1 lakh for land at Kasabe as the assessee himself offered it for tax. However, the addition of Rs. 18,53,564 for land purchased from Parvati Rane, Yashwant Rane, and Shilpa Rane was deleted as the AO's estimation was based on conjectures without any evidence.- Cost of Construction of Prakash Towers: The matter was remanded to the AO to verify the actual expenditure incurred by the assessee on construction.- Understatement of Saleable Area: The addition of Rs. 56,06,054 for suppressed sale receipts was deleted as the AO's addition was based on presumption without any definite evidence.- Excess Receipt in the Project at C.S. Pandit Site Ambernath: The addition of Rs. 1,97,504 was deleted as the AO's computation was based on notional basis without considering the agreements on record.Conclusion:The appeal No. 50/Mum/1997 was dismissed, and the appeal in ITA No. 130 was partly allowed.