2010 (6) TMI 600 - AT - Income Tax

ITAT Confirms Deletions & Set-Offs in Tax Case: Undisclosed Income, Unexplained Jewellery, Cash Credits

The ITAT confirmed the deletion of Rs. 20 lakhs as undisclosed income, Rs. 13,11,500 on unexplained jewellery, Rs. 48,285 and Rs. 38,018 on jewellery, Rs. ... Search and seizure - Undisclosed income - Share application money, Gift, Set off of loss and cash credit - During the course of search and seizure operation, certain assets and documents including cash, jewellery etc. were found - Held that: company had received share application money to the extent of Rs. 25 lakhs. In the instant case, money has been withdrawn by the assessee being director of the said company from company’s bank account - There is no material available on record that the amount of Rs. 20 lakhs was utilized or invested elsewhere by the assessee - Decided in favor of the assessee Regarding gift - In the instant case, the identity of the alleged donor has not been proved. The alleged gift deed does not disclose complete address of Shri Naveen Khera, the alleged donor - The assessee did not produce alleged donor for examination before the lower authorities for the reasons best known to him. There is no evidence on record to show the capacity of the donor in making the alleged gift - Decided against the assessee Regarding set off of loss - assessee submitted a return of income under section 153A of the Act disclosing additional income of Rs. 25 lacs on estimate basis on account of loose papers found during’ the course of search - Held that: ld.A.M. was not correct in stating that the assessee is not entitled to set-off of Rs. 5,28,302 against the addition of Rs. 12 lakhs confirmed by the ld.CIT(A) on account of blank cheques found with the assessee - assessee has discharged the onus of proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction - Decided in favor of the assessee Regarding addition of Rs. 2 laks, I find that Shri Shri Dataram Tehlani is regularly assessed to Income-tax - It seems that the Assessing Officer had made the addition without proper verification and without giving finding in respect of the creditor. In my opinion, the assessee has discharged the onus of proving the identity of the creditor, the capacity of the creditor and the genuineness of the transaction - Decided in favor of the assessee Issues Involved:1. Deletion of addition of Rs. 20 lakhs as undisclosed income.2. Addition of Rs. 13,11,500 on account of unexplained jewellery.3. Deletion of addition of Rs. 48,285 and Rs. 38,018 on account of jewellery belonging to Smt. Smita Gupta and Shri Mukesh Gupta respectively.4. Deletion of addition of Rs. 2 lakhs treating the gift received as unexplained cash credit.5. Deletion of addition of Rs. 4,50,000 on account of unexplained cash credits.6. Deletion of addition of Rs. 18,000 on account of interest paid to cash creditors.7. Allowing set-off of Rs. 5,28,302 from the addition of Rs. 12 lakhs confirmed by the CIT(A).Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 20 Lakhs as Undisclosed Income:The revenue appealed against the deletion of Rs. 20 lakhs added by the Assessing Officer as undisclosed income. The CIT(A) deleted the addition, verifying that the amount was withdrawn from M/s. Dolphin Marbles Pvt. Ltd. and paid to the assessee. The ITAT confirmed the CIT(A)'s order, noting no evidence that the amount was used elsewhere, thus, no addition was warranted.2. Addition of Rs. 13,11,500 on Account of Unexplained Jewellery:The Assessing Officer added Rs. 13,11,500 as unexplained jewellery in the name of Smt. Saroj Gupta. The CIT(A) deleted the addition, noting that Smt. Saroj Gupta was assessed to tax and the jewellery was explained through purchase bills and past assessments. The ITAT upheld the CIT(A)'s decision, agreeing that any unexplained jewellery should be taxed in Smt. Saroj Gupta's hands, not the assessee's.3. Deletion of Addition of Rs. 48,285 and Rs. 38,018 on Account of Jewellery Belonging to Smt. Smita Gupta and Shri Mukesh Gupta:The Assessing Officer added Rs. 48,285 and Rs. 38,018 for unexplained jewellery belonging to Smt. Smita Gupta and Shri Mukesh Gupta. The CIT(A) deleted these additions, accepting the explanations provided. The ITAT upheld the CIT(A)'s order, noting that the jewellery received during marriage and purchases were adequately explained and supported by evidence.4. Deletion of Addition of Rs. 2 Lakhs Treating the Gift Received as Unexplained Cash Credit:The Assessing Officer added Rs. 2 lakhs as unexplained cash credit, questioning the genuineness of the gift received from Shri Naveen Khera. The CIT(A) deleted the addition, accepting the gift deed and confirmation from the donor. The ITAT upheld the CIT(A)'s decision, noting the absence of evidence that the money was routed back to the assessee.5. Deletion of Addition of Rs. 4,50,000 on Account of Unexplained Cash Credits:The Assessing Officer added Rs. 4,50,000 as unexplained cash credits. The CIT(A) deleted the addition, noting that the creditors were assessed to tax, and the loans were reflected in their balance sheets. The ITAT upheld the CIT(A)'s decision, agreeing that the assessee had discharged the onus of proving the identity, capacity, and genuineness of the transactions.6. Deletion of Addition of Rs. 18,000 on Account of Interest Paid to Cash Creditors:This addition was consequential to the previous issue. Since the ITAT upheld the deletion of Rs. 4,50,000, the deletion of Rs. 18,000 on account of interest paid was also upheld.7. Allowing Set-off of Rs. 5,28,302 from the Addition of Rs. 12 Lakhs Confirmed by the CIT(A):The CIT(A) allowed the set-off of Rs. 5,28,302 against the addition of Rs. 12 lakhs confirmed on account of blank cheques found with the assessee. The ITAT upheld the CIT(A)'s decision, noting that the set-off was justified based on the excess disclosure of income by the assessee.Separate Judgments:The Accountant Member dissented on several issues, particularly on the deletion of Rs. 20 lakhs and the addition of Rs. 2 lakhs as unexplained cash credit. The Third Member agreed with the Vice-President on these issues, confirming the deletion of Rs. 20 lakhs and the gift of Rs. 2 lakhs as explained. The Third Member also upheld the set-off of Rs. 5,28,302 and the deletion of Rs. 4,50,000 and Rs. 18,000.