2003 (1) TMI 285 - AT - Income Tax

Interest under IT Act not valid without specific order, interest demands cancelled. Assessments mostly upheld, appeals partially allowed.

SAWAISINGH LAXMANSINGH RAJPUT. Versus INCOME TAX OFFICER.

SAWAISINGH LAXMANSINGH RAJPUT. Versus INCOME TAX OFFICER. - TTJ 086, 901, Issues Involved:1. Charging of interest under sections 234A and 234B of the IT Act, 1961.2. Addition of Rs. 50,000 for unexplained investment in a jeep for the assessment year 1994-95.3. Addition of Rs. 1,10,000 for unexplained investment in house construction for the assessment years 1995-96 and 1996-97.Detailed Analysis:1. Charging of Interest under Sections 234A and 234B:The primary issue was whether the interest under sections 234A and 234B could be charged without a specific order in the assessment order. The assessee contended that the interest was demanded via demand notices without a specific order in the assessment orders, making it illegal and bad in law. The counsel for the assessee relied on the decisions of CIT vs. Ranchi Club Ltd. and Smt. Tej Kumari & Ors. vs. CIT, arguing that without a specific order, the interest could not be charged.The Tribunal examined the retrospective amendments to sections 234A and 234B, which defined 'assessed tax' and mandated interest on assessed income. Despite these amendments, it was held that interest under sections 234A and 234B could not be charged without a specific order in the assessment order. The Tribunal cited multiple cases, including Ranchi Club Ltd., to support the decision that charging interest without a specific order was illegal. Consequently, the interest demands for all three assessment years were cancelled.2. Addition of Rs. 50,000 for Unexplained Investment in a Jeep (1994-95):The assessee purchased a jeep for Rs. 50,000, claiming it was funded by his brother. The AO and CIT(A) rejected this explanation due to lack of evidence, treating the amount as unexplained investment under section 69. The Tribunal upheld this decision, noting that the assessee failed to provide evidence supporting the claim that the money was provided by his brother. The Tribunal emphasized that the discretion under section 69 should be exercised based on the facts of each case, and in this case, the assessee's explanation was not satisfactory.3. Addition of Rs. 1,10,000 for Unexplained Investment in House Construction (1995-96 and 1996-97):The assessee constructed a house, claiming the funds came from his father's agricultural income. The AO estimated the construction cost at Rs. 2,20,000 and added Rs. 1,10,000 as unexplained investment for each year. The CIT(A) upheld this decision due to lack of evidence. The Tribunal confirmed the addition, noting that the assessee did not provide any evidence supporting the claim that the construction funds were provided by his father. However, the Tribunal accepted the declared construction cost of Rs. 1,80,000, adjusting the additions to Rs. 90,000 for 1995-96 and Rs. 95,000 for 1996-97.Additional Issue: Estimation of Agricultural Income (1994-95):The assessee contested the AO's estimation of agricultural income at Rs. 15,000, arguing that his land was fully irrigated. The Tribunal rejected this ground, noting the assessee did not declare any agricultural income or provide evidence of agricultural produce sales. Consequently, the AO's estimation was upheld.Conclusion:The Tribunal concluded that interest under sections 234A and 234B could not be charged without a specific order in the assessment order, and the demands for interest were cancelled. The additions for unexplained investments in the jeep and house construction were largely upheld due to lack of evidence from the assessee. The estimation of agricultural income was also upheld due to the absence of declared income or supporting evidence. The assessee's appeals were partly allowed.