2005 (3) TMI 429 - AT - Income Tax

Tribunal Partially Allows Appeal: Deletes Additions for Deficit Stock, Unexplained Expenses, and Reduces Gold Jewelry Addition.

SMT. BOMMANA SWARNA REKHA. Versus ASSISTANT COMMISSIONER OF INCOME TAX.

SMT. BOMMANA SWARNA REKHA. Versus ASSISTANT COMMISSIONER OF INCOME TAX. - TTJ 094, 885, Issues Involved:1. Addition of Rs. 3,76,062 on account of deficit stock.2. Additions of Rs. 10,89,370 and Rs. 6,28,831 as unexplained expenditure and unexplained investment.3. Addition of Rs. 1 lakh as unexplained investment.4. Addition of Rs. 14,080 based on estimated profit.5. Addition of Rs. 1,24,463 under s. 40A(3) for cash payments.6. Addition of Rs. 5,45,560 for unexplained gold jewelry.7. Addition of Rs. 25,000 for deposit certificates.Detailed Analysis:1. Addition of Rs. 3,76,062 on account of deficit stock:The assessee argued that the addition cannot be made in the block assessment under Chapter XIV-B as it is a special code for determining undisclosed income based on material found during the search. The tribunal agreed, stating that s. 158BB(1) does not allow using material seized during a survey operation for block assessment. The tribunal cited various cases to support this view and concluded that the addition of Rs. 3,76,062 should be deleted.2. Additions of Rs. 10,89,370 and Rs. 6,28,831 as unexplained expenditure and unexplained investment:These additions were based on a piece of paper found during the search at the residence of the assessee's husband. The tribunal noted that the paper, which lacked a date and signature, was found at the husband's premises and not at the business premises of the assessee. The tribunal emphasized that the onus was on the AO to prove that the transactions on the loose paper related to the assessee, which was not done. The tribunal deleted the additions of Rs. 10,89,370 and Rs. 6,28,831, stating that the AO's conclusions were based on surmises and conjectures.3. Addition of Rs. 1 lakh as unexplained investment:The AO added Rs. 1 lakh as unexplained investment, which the assessee claimed was from marriage gifts. The tribunal noted that the assessee failed to provide evidence for the source of the investment and thus upheld the AO's addition of Rs. 1 lakh.4. Addition of Rs. 14,080 based on estimated profit:The AO estimated a 10% profit on sales recorded in seized documents, resulting in an addition of Rs. 14,080. The assessee did not press this ground, and the tribunal dismissed it as 'Not pressed.'5. Addition of Rs. 1,24,463 under s. 40A(3) for cash payments:The AO disallowed cash payments in excess of Rs. 10,000 under s. 40A(3). The tribunal held that such disallowances are relevant for regular assessment and not for block assessment under Chapter XIV-B, which deals only with undisclosed income based on search evidence. The tribunal deleted the addition of Rs. 1,24,463.6. Addition of Rs. 5,45,560 for unexplained gold jewelry:The AO added the value of 1,186 grams of gold as unexplained jewelry. The tribunal found that the jewelry belonged to the assessee's father-in-law and was disclosed in his wealth tax return. The tribunal concluded that only 170 grams of jewelry could be considered unexplained and reduced the addition to Rs. 78,200.7. Addition of Rs. 25,000 for deposit certificates:The AO added Rs. 25,000 for deposit certificates found during the search, which the assessee claimed were purchased from marriage gifts. The tribunal accepted the assessee's explanation, noting that it is customary to receive cash gifts at marriages, and deleted the addition.Conclusion:The appeal of the assessee was partly allowed, with several additions being deleted or reduced based on the tribunal's findings.