TaxTMI 
TaxTMI 
2005 (1) TMI 322
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....s erred in sustaining the addition of Rs. 75,000 on account of jewellery. 5. The assessing authority is not justified in initiating penalty proceedings, because all the amounts assessed stand disclosed in various letters and explanations given by the assessee in the course of assessment proceedings. 6. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed of." 4. Ground Nos. 1 and 6 are general in nature while ground No. 5 does not arise from the impugned order, as such, no comments on our part are required for these grounds. 5. The grievance of the assessee in ground No. 2 relates to deduction under s. 80L of IT Act from the income computed in the block period. 6. The facts related to this issue in brief are that in the block period some of the income in the hands of the assessee pertained to the interest earned/accrued from NSC, dividend, etc. It was the contention of the assessee that the year-wise income was below the year-wise taxable limit under s. 80L and s. 10(32) of the IT Act, therefore, required no specific disclosure for the purpose of assessment, and as such, could not be treated as undisclosed income. ....
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....f loss for any previous year falling in the block period; or (B) On the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under cl. (c);. Explanation : For the purpose of determination of undisclosed income,— (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of this Act without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-s. (2) of s. 32: (2) In computing the undisclosed income of the block period, the provisions of ss. 68, 69, 69A, 69B and 69C shall, so far as may be, apply and reference to 'financial year' in those sections shall be construed as reference to the relevant previous year falling in block period including the pre....
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....nder this Act, if found to be false, then should be treated as undisclosed income; otherwise, if the AO had not found any expense, deduction or allowance, false, then he has to allow the same while computing total income for the purpose of s. 158BB. In the instant case, the AO nowhere had doubted that the claim of the deduction under s. 80L was not genuine or the same was false. Learned CIT(A) had also not stated that the claim of the assessee under s. 80L was false. He only confirmed the action of the AO by stating that no such deductions under Chapter VI-A of IT Act are available for computing income of the block period. It seems that learned CIT(A) had not considered the provisions of the Act in right perspective. In our opinion, cumulative effect of the language of s. 158BB, Explanation thereto, and the definition of undisclosed income as per s. 158B inserted with retrospective effect by the Finance Act, 2002, (is that) the total undisclosed income has to be computed in accordance with the provisions of Act, i.e., after allowing deductions provided therein if such deductions or allowances are not found to be false. Sec. 158BH also affirms intention of the legislature, which rea....
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.... maintained an average living standard which was evident from the facts that no worth mentioning costly household items were found during the course of search. It was stated that year-wise household expenses were more than reasonable and the contention of the AO was only imaginary and not supported by any evidence. 14. Learned CIT(A), after considering the submissions of the assessee, observed that the assessee had made substantial withdrawal from the accounting year 1993-94, onwards but for the earlier period the withdrawals were running between Rs. 33,000 to Rs. 73,940 per annum only. According to him, household annual expenditure was to be more or less uniform and could be increased only when there was some special function in the family but there was no such special function as admitted by the assessee, therefore, it was to be presumed that annual household expenses of the assessee were in the range of over Rs. 1 lakh per year, as such, withdrawals for household purposes for the financial years 1986-87 to 1990-91 and 1992-93 were on the lower side. Accordingly, it was held that the AO was justified in making the addition of Rs. 1 lakh. Now, the assessee is in appeal. 15. ....
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....sis and that is not sustainable in the assessment framed under s. 158BC. For the aforesaid view, we are also fortified by the decision of Tribunal, Chandigarh Bench 'B', in the case of Smt. Shashi Rani vs. Asstt. CIT, wherein at para 9.2 of the order dt. 26th April, 2004, following observations had been made : "9.2 We have heard the parties. On plain reading of the assessment order, it is evident that the AO while treating Rs. 3 lakhs as household expenses has not brought any material on record to suggest understated household withdrawals. Since the assessment was framed under s. 158BC, the estimation by the AO without having any seized material was not justified, as held in the cases of Pooja Bhatt and Chander Mohan." 17. The next ground relates to sustenance of addition of Rs. 75,000 on account of jewellery. 18. During the course of search proceedings, jewellery amounting to Rs. 3,01,678 was found. When the assessee was asked to explain the acquisition of this jewellery, following line of arguments was taken : "(i) Jewellery of 235.75 gms., approximately value of Rs. 2,500 inherited before the block period at the time of demise of mother in 1978. This jewellery is the....
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.... facts and in the circumstances of the case the learned CIT(A) has erred in deleting the addition of Rs. 45,000 made on account of cash in hand found at the time of search. 2. Learned CIT(A) has further erred in deleting the addition of Rs. 35,617 made on account of FDR and Rs. 13,400 made on account of petty investment pertaining to his wife. 3. Learned CIT(A) has erred in deleting the addition of Rs. 23,832 made on account of petty investment pertaining to minor child. 4. Learned CIT(A) has further erred in deleting the addition of Rs. 2,68,465 made on account of investment in UTI, FDR, NSC and savings account, etc. 5. It is prayed that the order of the learned CIT(A) be set aside and that of the AO restored. 6. The appellant craves leave to add or to amend the grounds of appeal before the appeal is heard and disposed of." 22.1. Ground Nos. 5 and 6 are general in nature so, do not require any comments on our part. 23. Ground No. 1 relates to deletion of addition of Rs. 45,000 made on account of cash found during the course of search. 24. Facts of the case in brief are that during the course of search a sum of Rs. 53,785 was found, out of which Rs. 45,000 w....
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.... investment was Rs. 6,86,558. The AO considered a sum of Rs. 3,45,244 as explained for the reasons stated at paras 5 and 6 of the assessment order dt. 31st Dec., 1998, and made the addition of the remaining amount of Rs. 3,41,314. The break-up of the above addition was following: Rs. (i) Investment pertaining to the period prior to the block period 35,617 (ii) Petty investments pertaining to wife 13,400 (iii) Petty investments pertaining to minor children 23,832 (iv) Investments made by the assessee 2,68,465 3,41,314 29. Before the learned CIT(A), it was stated that the impugned addition representing the investments in UTIs, FDRs, NSCs and saving accounts, etc. in the names of the assessee and his family members were properly explained as having been received and available out of savings and gifts received during the relevant periods. It was explained that the assessee was running transport business of plying trucks in his personal capacity apart from partnership business of running a general merchant shop/truck/country liquor business and in view of the nature and place of business, regular accounts for truck business, personal ....
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....rved that the above investments had been made in the year 1992 and considering the fact that children were born to the assessee after 15 years of marriage and considering the investment in the name of each child amounting to Rs. 12,832 and Rs. 11,000, it could not be stated that the same were out of undisclosed income of the assessee. Accordingly, addition of Rs. 23,832 was deleted. As regards to the remaining addition on account of investment, learned CIT(A) discussed those at pp. 4 and 5 of the impugned order. He observed that the assessee's explanation that he had considerable cash from his truck income and other business as well as withdrawals from the firm, could not be brushed aside in a summary manner. He pointed out that to determine the overall cash with the assessee from other sources of income, it was necessary to prepare the cash flow statement for the block period and thereafter consider each investment with reference to the available funds as per the cash flow statement. The learned CIT(A) stated that the cash flow statement had been prepared by the assessee for the block period 1986-87 to 1996-97 and his share of income from various firms during this period alo....
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....h May, 1990, which was sufficient to make the investment of Rs. 30,000 in two FDRs and similarly opening cash balance was Rs. 1,79,936.31 on 29th Dec., 1988, which was sufficient to cover the FDR of Rs. 15,000. He, therefore, held that the addition to the extent of Rs. 82,415 (Rs. 45,000 + Rs. 37,415) could not be sustained and was to be deleted. Learned CIT(A) pointed out that two FDRs were purchased on 1st June, 1995, for Rs. 17,370 each in the names of Shri Ashish Vij and Shri Karan Vij which were reflected at p. 11 of the cash flow statement and as per bank certificates, those two FDRs were initially purchased on 29th May, 1990, for Rs. 10,000 which were renewed on 1st June, 1992, with accumulated interest at Rs. 12,184 each and those were subsequently renewed. He pointed out that the assessee had opening balance of Rs. 91,951.79, therefore, investment of Rs. 10,000 each in the two FDRs was fully explained. Accordingly, addition was deleted. Learned CIT(A) further stated that the FDRs for Rs. 1,000 purchased on 14th Dec., 1994, by the assessee was explained to have been made out of cash in hand available and reflected at p. 31 of cash flow statement. That addition was als....