1998 (7) TMI 113 - AT - Income Tax

ITAT affirms CIT(A) decision deleting AO's additions for undisclosed transactions in separate business.

The ITAT upheld the CIT(A)'s decision to delete the additions made by the AO for the assessment years 1986-87, 1987-88, and 1988-89. It was determined ... - Issues:- Whether the CIT(A) was justified in deleting the additions made by the AO for the assessment years 1986-87, 1987-88, and 1988-89.Analysis:1. Issue of Deletion of Additions by CIT(A):- The AO made additions in the hands of the assessee based on undisclosed transactions found in memoranda accounts during a search operation.- The CIT(A) considered the appeals of the assessee, her husband, and son together and concluded that the unaccounted earnings in the textile business managed by the husband and son were utilized for a moneylending business.- CIT(A) found that the unaccounted investments in the moneylending business belonged to the husband and son separately, not the assessee.- CIT(A) determined that the son's earnings from undisclosed transactions did not affect the mother's capital and constituted a separate business.- The CIT(A) deleted the additions, stating that the undisclosed transactions were not linked to the mother's business and were managed independently by the son.2. Contentions of the Department and Assessee:- The Department contended that the profits from undisclosed transactions belonged to the mother as the son was managing the business and recording transactions in a book titled 'Kanagambal Textiles'.- The Assessee's counsel supported CIT(A), arguing that the son operated a separate business without using the mother's funds, as evidenced by affidavits submitted.- Anbazhagan stated that his earnings were invested in the moneylending business managed by his father, supporting the claim of separate businesses.3. Decision and Rationale:- The ITAT upheld the CIT(A)'s decision to delete the additions, emphasizing that the son's undisclosed earnings did not impact the mother's capital.- An assessment was also made in the son's name for the same undisclosed amounts, indicating the Revenue's view that the earnings belonged to the son.- As the son operated a parallel business without involving the mother's funds, the ITAT concluded that the mother could not be assessed for the undisclosed transactions.- The ITAT dismissed the Revenue's appeals, affirming the deletion of additions by the CIT(A) for all three assessment years.4. Cross-Objections:- The cross-objections filed by the assessee supported the CIT(A)'s order and did not challenge any adverse findings.- Since the appeals by the Revenue were dismissed, the cross-objections were deemed redundant and dismissed as well.In conclusion, the ITAT upheld the CIT(A)'s decision to delete the additions made by the AO, determining that the undisclosed transactions were part of a separate business managed by the son and did not impact the mother's capital. The Revenue's appeals were dismissed, and the cross-objections were also dismissed as they aligned with the CIT(A)'s order.