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Issues involved: Appeal against deletion of addition of income from undisclosed source u/s 153-C for assessment year 2005-06.
Summary: Issue 1: Addition of income from undisclosed source The revenue appealed against the deletion of an addition of Rs. 20,98,550 made by the Assessing Officer on account of income from an undisclosed source. The case involved a search and seizure operation where a diary was seized containing coded entries related to financial transactions. The Assessing Officer concluded that the amount mentioned in the diary was advanced by the assessee to another person. However, the assessee denied advancing any money and contended that the entries were for borrowing, not lending. The Assessing Officer made the addition based on the diary entries and statements of individuals involved in the transactions. Issue 1 Details: The learned CIT(Appeals) deleted the addition citing a Supreme Court judgment and lack of evidence connecting the assessee to the alleged transactions. The CIT(Appeals) emphasized that the Assessing Officer failed to establish a case against the assessee and should have conducted further investigation. It was noted that the Assessing Officer did not provide copies of statements or allow cross-examination of witnesses. The relationship between the parties involved was not conclusively proven, and the seized diary entry was considered insufficient evidence to support the addition. The CIT(Appeals) highlighted that no unexplained investment was made by the assessee, as evidenced by the loan taken from one individual but not given to another. The tribunal upheld the CIT(Appeals)' decision, stating that no connection was established between the assessee and the seized material, and no addition was warranted. Decision: The appeal of the revenue was dismissed, and the tribunal upheld the deletion of the addition of income from an undisclosed source for the assessment year 2005-06.
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