2011 (6) TMI 981 - AT - Income Tax

2012 (10) TMI 1207 - HC

Issues Involved:

1. Addition of undisclosed investment in construction of residential house.
2. Estimated addition towards household expenses.
3. Addition of foreign travel expenses.
4. Addition of unexplained expenditure u/s 69C.
5. Addition based on seized material alleging undisclosed income.

Summary:

1. Addition of Undisclosed Investment in Construction of Residential House:

Ground No.1 for AY 2002-03 and Ground No.2 for AYs 2003-04, 2004-05 involved the issue of confirming the action of the AO in making an addition of Rs. 2,38,206/- (for AY 2002-03), Rs. 27,611/- (for AY 2003-04), and Rs. 2,14,952/- (for AY 2004-05) being the alleged undisclosed investment in construction of a residential house. The assessee contested that the DVO adopted higher CPWD rates and that the actual expenditure was incurred from bank withdrawals. The CIT(A) upheld the AO's decision. However, the Tribunal allowed the assessee's appeal, noting that the difference between the valuations was nominal, the assessee maintained detailed expenditure accounts, and the DVO's self-supervision rebate was lower than usual.

2. Estimated Addition Towards Household Expenses:

Ground No.1 for AYs 2003-04 & 2005-06 and Ground No.3 for AY 2004-05 involved the issue of estimated addition towards household expenses. The AO considered the assessee's declared household expenses insufficient and made additions. The CIT(A) partially allowed the expenses. The Tribunal upheld the CIT(A)'s estimation as adequate and dismissed the grounds for all years.

3. Addition of Foreign Travel Expenses:

For AY 2004-05, Ground No.1 involved the issue of confirming the addition of Rs. 1,50,000/- for foreign travel expenses alleged to be incurred out of unaccounted income. This ground was not pressed and hence dismissed.

4. Addition of Unexplained Expenditure u/s 69C:

For AY 2005-06, Ground No.2 involved the issue of confirming the addition of Rs. 50,000/- on account of alleged payment made in cash treating it as unexplained expenditure u/s 69C. The AO and CIT(A) upheld the addition based on a loose paper found during the search. The Tribunal reversed the findings, noting the lack of nexus with the assessee's business activity and the absence of corroborative evidence.

5. Addition Based on Seized Material Alleging Undisclosed Income:

For AY 2006-07, Ground No.1 involved the issue of confirming the addition of Rs. 30,27,987/- based on seized material alleging undisclosed income. The AO and CIT(A) upheld the addition based on the presumption u/s 132(4A). The Tribunal reversed the findings, noting the lack of evidence linking the document to the assessee's business activity and the absence of corroborative evidence.

Other Grounds:

For AY 2006-07, Ground No.2 involved the issue of confirming the addition of Rs. 3,05,766/- found in the bank account of the appellant. This ground was not pressed and hence dismissed.

Conclusion:

In the result, the appeal for AY 2002-03 is allowed, and appeals for AYs 2003-04, 2004-05, 2005-06, and 2006-07 are partly allowed.

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