2003 (5) TMI 513 - HC - Income Tax

Summary

Issues Involved:
1. Addition of undisclosed income from M/s Shree Products.
2. Addition on account of gifts received by the assessee.

Summary:

1. Addition of Undisclosed Income from M/s Shree Products:
The search proceedings conducted at the business and residential premises of the assessee revealed various valuables, assets, documents, and a huge cash amount of Rs. 3,00,74,259. The assessee explained Rs. 9,64,419, and the balance amount of Rs. 2,97,09,940 was surrendered for taxation. The assessee initially admitted that the income of Rs. 23,18,210 shown as export profits of M/s Shree Products was undisclosed income of Ram Jas Nawal and his two sons, K.G. Nawal and K.K. Maheshwari. However, the assessee later retracted this statement, claiming the income was genuine and exempt u/s 80HHC. The AO found no documentary evidence supporting the genuineness of the income from M/s Shree Products and concluded that the firm was not genuine. The Tribunal affirmed the AO's view, noting that the retraction was an afterthought and the profits were an arranged affair. The High Court upheld the Tribunal's decision, emphasizing that the income shown in the name of M/s Shree Products, which was not a genuine firm, should be taxed in the hands of the assessee and his two sons under Chapter XIV-B of the IT Act.

2. Addition on Account of Gifts:
The second issue pertained to the addition of Rs. 10,00,000 on account of gifts received by the assessee. Initially, the assessee surrendered this amount for tax during the search but later retracted in the income-tax returns. The AO, considering the statements recorded during the search and the material on record, held that the gifts were not genuine. The Tribunal upheld this view, noting that the assessee failed to substantiate the identity, capacity, and genuineness of the donors. The High Court agreed with the Tribunal's findings, stating that the gifts were not genuine and should be assessed as undisclosed income of the assessee.

Conclusion:
The High Court dismissed the appeal, affirming the concurrent findings of the AO and Tribunal that the income from M/s Shree Products and the gifts received were not genuine and should be taxed in the hands of the assessee and his two sons. The court emphasized that entries in books of accounts of a non-genuine firm do not prevent the authorities from taxing the income in the hands of the actual beneficiaries.