2010 (8) TMI 336 - HC - Income Tax

Search and seizure Undisclosed income Investment on Hundis Tribunal finding investment not belonging to assessee but to family members as well No substantial question of law arise Appeal dismissed

Summary

Issues:
Whether the Tribunal was justified in deleting the addition of Rs. 3 lakhs as undisclosed income due to unexplained investments in hundis.

Analysis:
The case involved an income-tax appeal against the Tribunal's order regarding the addition of Rs. 3 lakhs as undisclosed income. The respondent-assessee had not initially disclosed ownership of a locker with a bank during a search and seizure operation. Subsequently, hundis and FDRs worth Rs. 18,35,000 were found in the locker, with the assessee admitting the source of investment as concealed income. The Assessing Officer (AO) added Rs. 3 lakhs to the total income, stating that the promissory notes found were not adequately explained by the assessee.

Upon appeal, the Tribunal overturned the AO's decision, citing that the manager who signed the promissory notes confirmed that no money was received, and the proprietor of the business also supported this claim. The promissory notes totaling Rs. 18,35,000 did not all belong to the assessee but to family members as well. Since none of the notes were signed by employees, the Tribunal found no reason to doubt the assessee's explanation that the amount was not given, especially as the proprietor did not sign them.

The High Court, after considering the Tribunal's findings and the facts of the case, determined that no substantial question of law was present for adjudication. It was established that the promissory notes for Rs. 3 lakhs were executed by the business's proprietor, who denied taking a loan from the assessee. The manager who signed the notes also confirmed that no loan was received due to the absence of the proprietor's signature. Consequently, the appeal was dismissed without any costs being awarded.