2010 (8) TMI 979 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the assessment order being barred by limitation.
2. Jurisdiction of the AO due to absence of an order u/s 127.
3. Disallowance of various expenses.
4. Addition of Rs. 50,000 by treating part of agricultural income as income from other sources.
5. Addition of Rs. 2,00,000 as unexplained credit (gifts received).
6. Addition of Rs. 2,30,000 as unexplained credit (loan and interest).

Summary:

1. Validity of the assessment order being barred by limitation:
The assessee contended that the assessment order served in February 2007, purportedly passed on 22.12.2006, was barred by limitation. The Tribunal found that the assessment order was posted through registered post on 30.12.2006 and received back undelivered. Therefore, there was no material to doubt the date of passing the assessment order as 22.12.2006. The objection was rejected, and Ground no.1 was dismissed.

2. Jurisdiction of the AO due to absence of an order u/s 127:
The assessee argued that the case was transferred without a specific order u/s 127. The Tribunal noted that the AO recorded the case transfer as per notification dated 26.7.2006. The assessee did not press this ground, and it was dismissed as not pressed. Ground no.2 was dismissed.

3. Disallowance of various expenses:
The AO disallowed 20% of expenses for personal use and unverifiable expenses. The Tribunal found the disallowance reasonable due to the absence of proper records and supporting documents. The disallowance of 25% for business promotion expenses was also deemed reasonable. Ground no.3 was dismissed.

4. Addition of Rs. 50,000 by treating part of agricultural income as income from other sources:
The AO estimated Rs. 50,000 out of the declared agricultural income as income from other sources due to the absence of supporting records. The Tribunal upheld the AO's decision, noting the lack of evidence for agricultural income. Ground no.4 was dismissed.

5. Addition of Rs. 2,00,000 as unexplained credit (gifts received):
The AO added Rs. 2,00,000 as unexplained income due to the failure to prove the genuineness of gifts from Shri Kamal Rathi and Shri Kishor V Modi. The Tribunal upheld the addition, citing the lack of relationship and occasion for the gifts, and the failure to produce the donors. Ground no.5 was dismissed.

6. Addition of Rs. 2,30,000 as unexplained credit (loan and interest):
The AO added Rs. 2,30,000 as unexplained credit, considering the loan and interest converted into a gift. The Tribunal, following the jurisdictional High Court's decision in Solid Containers Ltd. V/s ACIT, held that the amount retained in business became the assessee's income. Ground no.6 was dismissed.

Conclusion:
The appeal of the assessee was dismissed in its entirety. The judgment was pronounced in the Open Court on 6.8.2010.