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2012 (11) TMI 418 - AT - Income TaxUnaccounted investment in house property and cash deposits - Held that - Entire submission of the appellant is not supported by documentary proof. The appellant has shown to have earned income by way of business including income for A.Y. 2001-02 of Rs.41,931/- during the year under consideration, then also it is difficult to accept that appellant was able to make investment in house property to the extent of Rs.1,05,000/- and to deposit an amount of Rs.22,000/- in the bank. From the chart furnished and placed on record it is seen that the total funds available with the assessee was to the extent of Rs.1,16,581/- and the additions made by the A.O. was to the extent of Rs.1,27,000/-, thus the addition seems to be on higher side. Thus to meet the end of justice the disallowance be estimated and restricted to Rs.35,000/- instead of Rs.1,27,000/- made by the A.O. - partly in favour of assessee.
Issues:
1. Assessment of undisclosed income related to investment in house property and cash deposits. 2. Application of Section 68/69 of the Income Tax Act. 3. Adjudication of legality and merits of the case. Issue 1: Assessment of Undisclosed Income The appellant contested the addition of Rs.2.27 lakhs as undisclosed income due to unexplained sources of investment in a house property and cash deposits. The Assessing Officer (A.O.) concluded that the appellant failed to justify the source of these funds, leading to the addition. The CIT (A) upheld the A.O.'s decision. Subsequently, the ITAT directed the A.O. to reevaluate the evidence provided by the appellant. Despite the appellant's explanations, the A.O. added Rs.1.27 lakhs to the appellant's income, comprising Rs.1.05 lakhs for the house property and Rs.22,000 for cash deposits. The CIT (A) affirmed the A.O.'s decision, emphasizing the lack of documentary proof supporting the appellant's claims and the insufficiency of disclosed funds to justify the investments. Issue 2: Application of Section 68/69 The appellant argued that the provisions of Section 68/69 were not applicable to the case. However, the CIT (A) clarified that the A.O. did not invoke Section 68 for the cash deposit but treated it as undisclosed income. The appellant's plea for 'telescoping' the additions was rejected as the investments in the house property and cash deposits were deemed separate and required individual consideration. The CIT (A) confirmed both additions, emphasizing the lack of substantiated evidence linking the investments to disclosed income. Issue 3: Legality and Merits The appellant challenged the legality and merits of the additions, asserting that the investments were made from accumulated savings and business income. The appellant's contentions were based on a chart depicting total funds available. The ITAT acknowledged the appellant's accumulated balance and earnings but deemed the A.O.'s additions excessive. Considering the totality of facts, the ITAT estimated and restricted the disallowance to Rs.35,000 instead of the original Rs.1.27 lakhs, partially allowing the appeal. In conclusion, the ITAT partially allowed the appeal, reducing the disallowance amount based on the appellant's total available funds and earnings. The judgment clarified the application of Section 68/69, affirmed the assessment of undisclosed income related to investments, and addressed the legality and merits of the case comprehensively.
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