2013 (8) TMI 111 - HC - Income Tax

Undisclosed income - Difference in opening and closing stock - CIT upheld addition - Tribunal deleted addition following previous decisions - Held that - assessee had filed his return of income for the AY 99-00 earlier and the Revenue had not initiated any proceedings u/s 147 of the act for that year - Therefore, the capital of the assessee as n individual together with the capital of Nanak Cutlery Mart as reflected in that return of income should be taken into consideration by the AO while determining the difference between closing balance for the AY 1999-00 and the opening balance for AY 2000-01 and the difference between the same would be upheld as addition - However, this had not arisen from the seizure of the assets/records during search; therefore, such addition cannot be made - Following decision of N.R. Paper & Board Limited & Ors. vs. DCIT 1998 (3) TMI 102 - GUJARAT High Court and CIT vs. Shambhulala C. Backkaniwala 1999 (9) TMI 25 - GUJARAT High Court - Decided against Revenue. Undisclosed income - Gift from mother - Tribunal deleted addition - Held that - identity of donor had been proved and the cash book of donor was found to be having sufficient cash balance to gift - There was a declaration of gift executed and all the accounts of the donor had been maintained by computerized books - no error in the reasonings of the Tribunal to interfere as the assessee succeeded in proving identity, genuineness of the transaction and creditworthiness of the donor. The assessee had discharged the burden - Decided against Revenue. Unaccounted investment - Investment in Co-op. Housing Society - Held that - there was no conclusive documentary evidence to hold that the assessee-respondent had invested a sum in Ninad Co-op. Housing Society by using his four employees as conduits for booking of flats - No opportunity of cross objection was given to person in whose books of account, the said transaction of Co-op. Housing Society had emerged - when the Tribunal found that there was violation of principles of natural justice by not allowing cross examination despite such request coupled with absence of any evidence, no error much less any substantial error is committed by the Tribunal in deleting the said amount - Decided in favour of Revenue. Unaccounted investment - Investment made in house property - Held that - The statement of person with whom transaction was done was recorded by the Assessing Officer, however, no permission was granted to cross examine him. Although it can be noticed that the legal suit was initiated against the builder & necessary documents were also produced. The agreement concerned was of March, 1995 whereas the block period was from 01.04.1996 to 06.09.2001. The Tribunal rightly held that the transaction would not fall within the block period under consideration - Decided against Revenue. Unaccounted investment in shares - Held that - Assessing Officer did not consider the genuineness of the entries appearing in computerized cash book - Majority of the investments made through cheques and the paper books presented had contained all the details - Tribunal has reduced the disallowance made by A.O. - Decided against Revenue.

Issues Involved:

1. Deletion of addition made by Assessing Officer of Rs.3,46,189/- and Rs.72,956/-.
2. Non-appreciation of facts by the Appellate Tribunal regarding the maintenance of regular books of accounts.
3. Deletion of addition of Rs.2,01,000/- on account of gift received from assessee's mother.
4. Deletion of addition of Rs.20 lakhs being unaccounted investment in Ninad Co-op. Housing Society.
5. Deletion of addition of Rs.5 lakhs being unaccounted investment made with Shri Yogesh Raval.
6. Deletion of addition of Rs.5 lakhs being unaccounted investment made with Shri Dinesh Dhabalia.
7. Deletion of addition of Rs.7,43,000/- and Rs.2,00,000/- on account of unaccounted investment in Jay Shiv Apartments.
8. Deletion of addition of Rs.10 lakhs being unaccounted investment in land purchased from Bhavya Ghantakarnan Cottage Association.
9. Deletion of addition of Rs.5.51 lakhs being unaccounted investment in Dwirup Bunglows.
10. Deletion of addition of Rs.1,80,000/- being unaccounted investment in Santro Car.
11. Deletion of addition of Rs.3 lakhs being fictitious entries in the name of Bharat Textiles.
12. Restriction of addition made by Assessing Officer of Rs.1,17,900/- to Rs.76,635/- being unaccounted investment in shares.

Detailed Analysis:

Issue 1 & 2: Deletion of Addition of Rs.3,46,189/- and Rs.72,956/-
The Tribunal deleted the addition of Rs.3,46,189/- and Rs.72,956/- based on precedents from the Gujarat High Court in the cases of N.R. Paper & Board Limited and CIT vs. Shambhulala C. Backkaniwala. The Tribunal held that the difference between the opening and closing balances was not reconcilable but did not arise from the seizure of assets/records during the search. Therefore, the additions were deleted.

Issue 3: Deletion of Addition of Rs.2,01,000/- on Account of Gift
The Tribunal found that the identity of the donor (assessee's mother) was proven, and the donor's cash book showed sufficient cash balance to make the gift. The Tribunal held that the assessee had successfully proved the genuineness of the transaction and the creditworthiness of the donor, thus deleting the addition.

Issue 4: Deletion of Addition of Rs.20 Lakhs in Ninad Co-op. Housing Society
The Tribunal noted the lack of conclusive documentary evidence to support the claim that the assessee invested Rs.20 lakhs in Ninad Co-op. Housing Society using employees as conduits. The Tribunal also highlighted the violation of natural justice as the assessee was not allowed to cross-examine a key witness. Consequently, the addition was deleted.

Issue 5: Deletion of Addition of Rs.5 Lakhs with Shri Yogesh Raval
The Tribunal found that the transaction with Shri Yogesh Raval occurred outside the block period under consideration. The Tribunal also noted that the assessee was not permitted to cross-examine Shri Raval, leading to the deletion of the addition.

Issue 6: Deletion of Addition of Rs.5 Lakhs with Shri Dinesh Dhabalia
The Tribunal held that there was no proof of the alleged transaction with Shri Dinesh Dhabalia, and the assessee was not allowed to cross-examine him. The Tribunal concluded that the revenue failed to provide unambiguous evidence, leading to the deletion of the addition.

Issue 7: Deletion of Addition of Rs.7,43,000/- and Rs.2,00,000/- in Jay Shiv Apartments
The Tribunal rejected the addition based on the general practice of cash payments in real estate transactions, noting that substantial evidence was lacking. The Tribunal deleted the addition, stating that relying solely on a partner's statement without further inquiry was unjust.

Issue 8: Deletion of Addition of Rs.10 Lakhs in Bhavya Ghantakarnan Cottage Association
The Tribunal found that the assessee had provided sufficient evidence, including voucher and post-dated cheques, to support the claim of investment. The Tribunal concluded that the addition was based on presumption and deleted it.

Issue 9: Deletion of Addition of Rs.5.51 Lakhs in Dwirup Bunglows
The Tribunal noted that the payment for the property was reflected in the books of accounts of the assessee and his family members. The Tribunal found that the investment was properly accounted for and deleted the addition.

Issue 10: Deletion of Addition of Rs.1,80,000/- in Santro Car
The Tribunal found that the assessee had returned the car and received back the payment, which was evident from the documents found during the search. The Tribunal deleted the addition based on the clear facts.

Issue 11: Deletion of Addition of Rs.3 Lakhs in Bharat Textiles
The Tribunal noted that the drafts were purchased from available cash and there was no contrary evidence from the revenue. The Tribunal deleted the addition.

Issue 12: Restriction of Addition of Rs.1,17,900/- to Rs.76,635/- in Shares
The Tribunal examined the genuineness of the entries in the computerized cash book and found that the majority of investments were made through cheques. The Tribunal reduced the addition by 65%, finding no substantial legal issue.

Conclusion:
The High Court found that the majority of the issues were based on factual determinations by the Tribunal, with no substantial question of law arising. Consequently, the Tax Appeal was dismissed.

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