2002 (12) TMI 553 - AT - Income Tax

Summary

Issues Involved:
1. Unexplained investment in lands.
2. Difference in cost of construction.
3. Deduction for bona fide difference of opinion in cost of construction.
4. Investment in FDRs.
5. Cash found at the residence.
6. Investment in Chit Fund.
7. Addition of truck income under section 44AE.
8. Cash flow chart explanation.
9. Charging of interest under section 158BFA of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Unexplained Investment in Lands:
The assessee was aggrieved by the confirmation of an addition of Rs. 24,765 for unexplained investment in lands. The Assessing Officer (AO) noted that the value of the investment was Rs. 79,765, and the assessee had surrendered Rs. 37,000 and Rs. 18,000 on account of truck income in the block return, leaving Rs. 24,765 unexplained. The CIT(A) confirmed the addition. The Tribunal remanded the issue back to the AO for verification of the cash flow statement provided by the assessee, directing the AO to give a reasonable opportunity of being heard.

2. Difference in Cost of Construction:
The AO referred the case to the DVO, who estimated the cost of construction at Rs. 11,90,220. After deductions, the AO determined the cost at Rs. 10,35,394, resulting in a difference of Rs. 1,11,974. The AO made an addition of Rs. 1,23,850. The CIT(A) sustained the addition. The Tribunal found that the addition was unjustified as the difference was negligible and based solely on the DVO's report. The Tribunal deleted the addition, citing the Bombay High Court's decision in Vinod Danchand Ghodawat's case.

3. Deduction for Bona Fide Difference of Opinion in Cost of Construction:
The assessee argued for an additional 10% deduction for self-supervision and other factors, which was not accepted by the CIT(A). The Tribunal agreed with the assessee, noting that the AO had already allowed certain deductions and the remaining difference was negligible. The Tribunal deleted the addition.

4. Investment in FDRs:
The AO added Rs. 40,000 for STDRs purchased in 1988 and Rs. 18,000 for FDRs purchased in 1990 and 1991, stating the sources were unexplained. The CIT(A) confirmed the addition. The Tribunal remanded the issue back to the AO for verification, similar to the unexplained investment in lands.

5. Cash Found at the Residence:
The AO found Rs. 3,10,550 at the residence and added Rs. 3 lakhs as unexplained cash. The CIT(A) accepted the explanation for Rs. 2 lakhs but sustained Rs. 1 lakh. The Tribunal found that the cash book of the firm showed sufficient cash to explain the amount found and deleted the addition of Rs. 1 lakh.

6. Investment in Chit Fund:
The AO added Rs. 55,000 based on receipts from M/s. Shri Ram Chander Finance Company and another Rs. 5,000 from Annexure A-2, which the assessee claimed did not pertain to him. The CIT(A) confirmed the addition. The Tribunal remanded the issue back to the AO for fresh adjudication, directing the AO to consider the cash flow chart.

7. Addition of Truck Income Under Section 44AE:
The AO added Rs. 48,000 for income from two trucks, which the assessee claimed were out of order. The CIT(A) did not address this issue. The Tribunal found evidence that one truck was not working and deleted the addition for that truck, sustaining the addition for the other truck but allowing it to be adjusted against other unexplained investments.

8. Cash Flow Chart Explanation:
The CIT(A) did not address the ground related to the cash flow chart, which explained the availability of funds from the firms in which the assessee was a partner. The Tribunal noted that this issue was related to other grounds and did not require a separate remand as the related issues were already sent back to the AO.

9. Charging of Interest Under Section 158BFA:
The Tribunal followed its earlier decision in Narula Transport Co.'s case, where it was held that interest under section 158BFA should not be charged if the delay in filing the return was not attributable to the assessee. The Tribunal directed the AO not to charge interest under section 158BFA.

Conclusion:
The assessee's appeal was partly allowed, with several issues remanded back to the AO for verification and fresh adjudication, while the Department's appeal was dismissed.