2003 (12) TMI 291 - AT - Income Tax

Tribunal rules in favor of assessee on undisclosed income addition and interest levy appeal

UB. ENGINEERS. Versus DEPUTY COMMISSIONER OF INCOME TAX.

The tribunal ruled in favor of the assessee regarding the addition of undisclosed income as capital introduced by a partner, emphasizing that the firm ... Cash credits Issues:1. Addition of undisclosed income as capital introduced by a partner.2. Levy of interest under sections 234A and 234B of the IT Act.Issue 1: Addition of Undisclosed Income as Capital Introduced by a Partner:The appeal arose from the CIT(A)'s order regarding the addition of Rs. 11,50,000 as undisclosed income of the firm, introduced by a partner, Mr. A.P.S. Bawa. The appellant contended that due to Mr. Bawa's retirement and unavailability, they couldn't provide documentary evidence of the source of the funds. The CIT(A) upheld the AO's decision, stating that the firm failed to prove the identity, creditworthiness, and genuineness of the transaction. The appellant argued that the amount came through banking channels and referenced Mr. Bawa's individual assessment order, indicating the genuineness of the capital contribution. They also cited legal precedents to support their case. The Departmental Representative defended the lower authorities' orders, stating that the taxability of the amount in Mr. Bawa's hands was not final. The tribunal ruled in favor of the assessee, emphasizing that the firm demonstrated the source of the credited amount, even without producing Mr. Bawa, and set aside the addition.Issue 2: Levy of Interest under Sections 234A and 234B of the IT Act:The second ground of appeal concerned the levy of interest under sections 234A and 234B of the IT Act. The assessment finalized by the AO did not include a specific direction for charging interest. The appellant argued that the absence of such a direction precluded the charging of interest. Legal precedents and a decision by the Delhi Bench of the Tribunal supported the appellant's stance. The Departmental Representative contended that interest levy was mandatory and referenced a recent decision by the Delhi Bench. The tribunal held in favor of the assessee, noting that the assessment order lacked any direction for charging interest under sections 234A and 234B. Citing relevant case law, the tribunal emphasized that without a specific direction in the assessment order, the interest could not be charged, thereby allowing the appeal of the assessee.This detailed analysis of the judgment covers the issues of addition of undisclosed income and the levy of interest comprehensively, outlining the arguments presented by both parties and the tribunal's decision based on legal principles and precedents cited during the proceedings.