TaxTMI 
TaxTMI 
2006 (3) TMI 248
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.... In the course of search, cash of Rs. 47,760 was found out of which a sum of Rs. 40,000 was seized. On being called upon to explain the source of the cash, it was stated by the assessee during the course of assessment proceedings that he, in his preliminary statement recorded on the date of search viz. 15th July, 1998, had claimed to have Rs. 35,000 at his residence. A sum of Rs. 1,47,500 was withdrawn by the assessee from his bank account No. 4879 with SBBJ on 16th April, 1998 and out of that, gold worth Rs. 50,000 was purchased from Ghanshyam Soni, an amount of Rs. 50,000 was given to his wife Smt. Santosh Soni in cash and the balance amount of Rs. 47,500 was lying at his residence. The AO did not accept the assessee's explanation because though the sum of Rs. 1,47,500 was withdrawn from the bank on 16th April, 1998 but its application claimed for purchase of gold worth Rs. 50,000 and equal sum stated to have been given to his wife was not verifiable. The AO observed that the assessee had not given complete address of the said Shri Ghanshyam Soni nor produced voucher for the purchase of gold worth Rs. 50,000. It was further noticed that the cash was withdrawn on 16th April, 1....
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....hese statements of the earlier years including balance sheet etc. for making addition on account of household expenses. Hence on the one hand he refused to consider these details enabling the assessee to explain the source of transactions, on the other, he considered those very details for making addition on account of household expenses. Such a course of action blowing hot and cold in the same breath cannot be upheld. Be that as it may, the crucial question which looms large over the landscape of the factual matrix of the instant case is to decide as to whether or not the assessee is entitled to furnish cash flow statement to explain the transactions, when no books of account are maintained? In our view the reply to this question has to be in affirmative for the obvious reason that all the transactions, assets or incomes of a person, not maintaining books of account, cannot be said to be undisclosed income, moreso when the income earned is negligible not warranting the maintenance of books . of account as per the provisions of the Act and the assessee is regularly assessed to tax having filed his returns of income in due course. If the view of the AO is accepted, it would play hav....
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....ld was purchased for Rs. 50,000, an equal amount was given to his wife and the balance amount was available with him. The withdrawal of the sum from bank on this date is duly verifiable from the copy of bank statement placed on record and that fact has also not been disputed by the AO. The only reason for which the AO had not accepted the claim of the assessee in this regard is that the assessee had not adduced any evidence for the purchase of gold worth Rs. 50,000. It is strange that the AO is not accepting the utilization of cash on the ground that the purchase voucher was not available. There is every reason for the AO to doubt a transaction in which a bill is found during the course of search and the source of spending the amount is not coming up. We are confronted with a converse situation in which no bill for purchase of gold was found and the assessee's explanation for having spent a sum of Rs. 50,000 out of the amount withdrawn from bank, on this transaction has been found unacceptable by the AO. It is further noticed that the AO doubted the availability of cash from bank on the ground that the amount was withdrawn on 16th April, 1998 whereas the search took place on 15....
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....nt order passed for the asst. yr. 1985-86 in which the assessee's net wealth was determined inclusive of this much of gold jewellery. He did not accept the possession of the gold jewellery to this extent for the reason that the assessee had not furnished any wealth-tax return after asst. yr. 1985-86 and further no list of ornaments was ever filed. As regards the gold ornaments of 116.640 grams purchased by the assessee Shri A.P. Soni were concerned; that was also not accepted because the assessee had not furnished the bill of Shri Ghanshyam Soni from whom the gold was allegedly purchased and the payment of Rs. 50,000 was stated to have been made out of cash withdrawal of Rs. 1,47,500. The claim of Smt. Santosh Soni having received 198.280 grams (net) gold jewellery by way of Will of late Shri Ramchandra was also not accepted by the AO because she had not disclosed this fact at the time of search. It was further observed by the AO that the assessee's brother Shri Suraj Prakash had also claimed to have received jewellery from Shri Ramchandra Soni as per his Will. It was also noticed that sale bill of gold ornament issued by one Shri Ramchandra Swarankar was found during the c....
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.... Ramchandra Soni weighing 198.280 grams, we find that the Will was found during the course of search and one of the other legatees namely Shri Suraj Prakash Soni, assessee's brother, also claimed receipt of gold jewellery through this Will. The copy of the Will is available at p. S-31 to S-32 of the paper book and the name of Smt. Santosh Devi against whom 20 tolas are mentioned, find its due place. We further note that the Tribunal in the case of Shri Suraj Prakash Soni has accepted the receipt of gold jewellery out of the Will of Shri Ramchandra. Copy of such order is available at p. S-211 onwards of the paper book and the relevant discussion is made on p. S-237. These facts indicate that there cannot be any reason for doubting the receipt of gold jewellery of 198.280 grams by Smt. Santosh Soni as per the Will of Shri Ramchandra. We further find that the assessee had claimed to have purchased gold jewellery of 116.64 grams from one Shri Ghanshyam Soni with Rs. 50,000 withdrawn by him from his bank on 16th April. 1998. The source of the amount is duly explained as having come out of the withdrawals made from the bank. In these circumstances there cannot be any ground for not a....
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....97-98 respectively. In the first appeal the learned CIT(A) got partly satisfied with the assessee's explanation and sustained the additions of Rs. 28,000, 15,000 and Rs. 25,000 as unexplained bank deposits. Both the sides are in appeal against their respective stands. 10. We have heard both the sides and perused the relevant material on record. The AO has made the additions by considering the entries of deposits in the bank accounts of the assessee. The learned CIT(A) allowed relief on account of entries which were individually explained by the assessee but sustained the addition for the amounts which were generally explained. Insofar as the allowing of part relief is concerned, we find that the sources thereof were clearly explainable and the learned CIT(A) had rightly proceeded to delete these additions. Now turning to the additions sustained for the asst. yr. 1989-90, it is noticed that the cash flow statement for this year is available at p. 198 of the paper book from which it is apparent that the three entries namely Rs. 5,000, Rs. 11,000 and Rs. 12,000 are shown to have been deposited in bank on 9th March, 18th March and 21st March, 1989. We have dealt with the reliabi....
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....ent in household items. In the course of such operation some household articles were found. The assessee was also found to be the owner of car and scooter. The assessee explained the investment made in the purchase of vehicles and other household articles as under: Sl. No. Name of articles Investment Financial Yr. Mode of Payment 1. Fiat Gar (Second hand) 25,000 1996 Cash 2. Scooter 22,000 1993 Cash 3. Navdeep Floor Mill 7,150 Jan., 95 Cash 4. Godrej Fridge 5,000 1988 Cash 5. BPL Washing Machine (in the name of Santosh) 8,800 1998 Cash 6. Geyser 2,300 1995 Cash 7. Wooden Pooja Ghar 6,500 1996 Cash 8. Sofa Set and Diwans 9,000 1992 Cash The assessee, in his statement under s. 132(4) admitted that the investment In the household articles was not recorded anywhere as he was not maintaining any account books. In the course of assessment proceedings it was contended that all the household articles and vehicles were duly considered in the balance sheets of the respective assessment years and hence no addition was called for. Not convinced, the AO....
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....tails such as weight of. gold ornaments, job charges received, impurities mixed etc. on the basis of these annexures. Three types of calculations were made for making additions. We will discuss each of them separately. 14. First calculation is made vide para 37 of the assessment order for the asst. yrs. 1997-98, 1998-99 and 1999-2000 in which the starting point is the quantity of gold, ornaments manufactured by the assessee on the basis of loose papers. The assessee is not disputing the quantity noted by the AO. The AO noticed that these annexures contained detail of job charges received on certain occasions. It was contended by the assessee that job charges were not received separately but gold was retained in lieu of alloy/impurity mixed in the gold ornaments. The AO did not find this contention to be acceptable for the reason that the assessee in his statement under s. 132(4) has admitted that he charged Rs. 6 per gram as job work and out of it, Rs. 3 per gram was paid to artisans. It was further admitted by the assessee that the gold ornaments were made of 22 ct. whereas the assessee charged the amount of pure gold. The AO further observed that the diaries and note book did ....
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.... the perusal of these annexures with the assistance of the assessee in person we have observed that in some cases job charges have been shown separately along with the difference in value between 24 ct. and 22 ct. and in certain other cases only the assessee had received the excess of gold resulting from the alloy mixed. We note that the AO has not only applied 8.33 per cent rate representing the difference between 24 ct. to 22 ct. but also added 3.5 per cent on account of mixing of copper alloy. Naturally when 8.33 per cent is considered as assessee's retention on account of mixing of alloy, there cannot be any question of adding 3.5 per cent again towards the profit of the assessee on account of retention of gold. There is no material to show that the assessee had received 3.5 per cent extra in addition to 8.33 per cent. We further note that the assessee had mentioned in his statement that he was charging Rs. 6 per gram as job work out of which Rs. 3 per gram was paid to artisans. Considering both the aspects being the receipt of job charges and profit on account of retention of gold in lieu of alloy mixed, we are of the considered opinion that the learned CIT(A) was justifie....
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....for the three years as the basis for making addition. Accordingly he worked out job charges at the rate of Rs. 30 per gram and also applied 11.83 per cent being the profit on account of retention of gold in lieu of alloy mixed. From this figure he allowed deduction being the wastage to artisans. This resulted into the additions at the above referred amounts. The learned CIT(A) deleted this addition in entirety. 17. We have heard both the sides and gone through the relevant material on record. The case of the AO is that the weight of gold ornaments at Annex. A-8 from pp. 25 to 94 represents the manufacturing work got done by the assessee on which it had received job charges at Rs. 30 per gram and profit on account of retention of gold in lieu of the alloy mixed. On the contrary it has been vehemently argued by the assessee's counsel that these pages represent the gold ornaments sent for Nagina setting out of those which were got manufactured by the assessee through Annex. A-8 pp. 1 to 25. It is found that the AO has himself recorded a finding that there is no mention of the receipt of impurity by the assessee in the shape of job charges on these pages. We further find that th....
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....arrying out only the work of Nagina setting and no gold ornaments were got manufactured by it. The assessee was asked to furnish name and address of the customers from whom gold ornaments were received for the purposes of Nagina setting but no such details was furnished. Since the assessee was carrying out the same business of manufacturing of gold ornaments, it was held by the AO that the assessee's explanation was not acceptable. Accordingly he calculated job charges at the rate of Rs. 30 per gram, profit on account of retention of gold in view of alloy mixed at 11.83 per cent and also added the job charges shown by the assessee amounting to Rs. 34,047, Rs. 68,614 and Rs. 20,882 towards Nagina setting. This resulted into making of additions at Rs. 2,49,301, Rs. 5,52,635 and Rs. 1,48,525 in the asst. yrs. 1995-96 to 1997-98. In the first appeal, the learned CIT(A) deleted the addition of job charges @ Rs. 30 and also profit on account of retention of gold at 11.83 per cent. He however, sustained the addition at the amounts shown by the assessee himself towards job charges and the value of wastage as per chart on p. 25 of the assessment order. Accordingly addition of Rs. 49,173....
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.... instance where the fact of receipt of a particular item and the return of a different item was available. No such instance could be pointed out. On the contrary the assessee along with his Authorised Representative has shown that the items relating to these years pertained only to the job of Nagina fitting and no manufacturing was done by the assessee or some outsider artisan. Pages Nos. 158 to 165 of the paper book are the summary of these documents on the basis of which the AO had opined the assessee to have done manufacturing as well as Nagina fitting. On the perusal of these pages along with the photocopies of various documents of Annex. A-8 we find that the assessee was usually charging 300 milligrams of the gold against the fitting of 100 stones. The learned Departmental Representative could not draw our attention towards any paper of these annexures to show that the fact of having done manufacturing was mentioned thereon. Under these circumstances we are of the considered opinion that the finding of the AO is based on presumption and is not backed by any relevant material. In our view, the only possible , addition that could have been made on this score is towards the conve....
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....21,400 34,300 Including LBT 15,700) 1994-95 45,000 24,700 20,300 1995-96 50,000 28,800 21,200 1996-97 55,000 31,050 23,950 1997-98 60,000 35,300 24,700 (Including 8,000 for Vaishnav Devi tour) 1998-99 60,000 39,200 20,800 1999-2000 (upto 15-7-98) 35,000 34,600 400 4,95,700 2,91,740 2,03,960 The learned CIT(A) sustained addition of Rs. 23,700 being the amount of land and building tax and the amount spent on visit to Mata Vaishno Devi. The remaining amount of addition was deleted on the premise that it was made by the AO on estimate basis. The Revenue is disputing the excess relief allowed, whereas the assessee has challenged the sustenance of partial addition. 22. We have heard the rival submissions and perused the relevant material on record. It has been vehemently argued by the learned Authorised Representative that the addition was totally unwarranted because it was made by the AO on account of his estimate of household expenses. He invited our attention towards certain decisions in which the addition ....
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....d in the shape of investments etc. In this example again the amount of Rs. 100 (Rs. 60 + Rs. 30 + Rs. 10) would become the subject-matter of taxation. In no situation the income can be taken at more than Rs. 100 by considering the income earned and also the amount invested. We are confronted with a case in which the AO has made addition for more than Rs. 100. In the first instance he computed the income earned by the assessee from his business and then he also taxed the household expenses, investments made etc. This course of action adopted by the AO has no legal sanctity. He could have either considered the income aspect or the expenditure and investment aspect and not a combination of these two. In the foregoing paras we have adjudicated upon the inclusion of income earned by the assessee from his business during the block period. There is no warrant for making separate additions towards household expenses incurred out of such income. In this view of the matter we are of the considered opinion that no addition at all was justified towards household expenses. 24. Ground No. 9 is against the confirmation of additions on account of undisclosed income for non-furnishing of returns....
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....e facts and the amendment carried out, it becomes apparent that the income for asst. yrs. 1989-90 to 1992-93 and asst. yr. 1995-96 could not have been included in the block assessment as the income in these years is below the taxable limit. We find that for the asst. yr. 1997-98 the income has been declared and assessed at Rs. 62,484. The return for this year was filed on 31st Oct., 1998 which is within the time prescribed under s. 139 and s. 158BB provides for its exclusion. This ground is, therefore, accepted. 26. Ground No. 10 regarding the charging of interest under s. 158BFA(1) was not, pressed by the learned Authorised Representative. 27. Ground No. 2 of the Revenue's appeal is against the deletion of addition of Rs. 77,500 made for unexplained investment in deposit with CRB. The facts of this ground are that the assessee deposited a sum of Rs. 1 lakh as per Annex. A-2 p. 2 with CRB on 23rd Dec., 1995. On being called upon to explain the source of investment it was stated that he received a gift of Rs. 20,000 from Shri Naresh Soni and similar amount was gifted by Smt. Neeta Soni to his wife. It was explained that these amounts were received through cheque and the am....
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....and gone through the relevant material on record. The evidence for the sale of house at Rs. 1,50,000 in the shape of sale deed is available at pp. 142 to 146 of the paper book. As per this sale deed the house was sold on 3rd Nov., 1995. The AO was right in accepting the source of deposit but was unjustified in treating the interest income in the hands of the assessee for the reason that the house belonged to the HUF and to his father Shri Manohar Lal Soni. It is further found that Shri Anand Prakash Soni HUF was assessed to wealth-tax for the asst. yr. 1985-86 and this house was shown as HUF's house and was admitted by the AO while passing the order. Under these circumstances there was no question of taxing the interest income in the hands of the present assessee. We uphold the impugned order on this score. 31. Ground No. 4 is against the deletion of addition of Rs. 10,000 made on account of unexplained investment in KVP in the name of minor son. On being show caused to explain the source of investment, it was explained that the amount was invested out of his regular business funds and was duly recorded in the cash flow statement. Not convinced, the AO made the addition whic....