2006 (9) TMI 625 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of interest paid from undisclosed sources.
2. Deletion of addition on account of undisclosed investment in family property.
3. Admission of additional ground regarding interest deduction for AY 1999-2000.
4. Application u/s 154 of the Income Tax Act, 1961.

Summary:

1. Deletion of Addition on Account of Interest Paid from Undisclosed Sources:
The revenue appealed against the deletion of Rs. 46,47,070 added by the assessing officer on account of interest paid by the assessee from undisclosed sources. The assessing officer had determined this amount based on seized documents indicating loan transactions. The Commissioner (Appeals) deleted the addition, reasoning that only cash of Rs. 3 lakhs was found during the search, and no other significant assets were discovered. The Commissioner (Appeals) also noted that the assessing officer failed to identify the persons from whom the loans were allegedly taken and that the cash flow statement prepared by the assessee showed sufficient funds to cover the interest payments. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the source of interest payments was explained through the cash flow statement, and no addition under Section 69C was warranted.

2. Deletion of Addition on Account of Undisclosed Investment in Family Property:
The revenue also contested the deletion of Rs. 5 lakhs added by the assessing officer as undisclosed investment in acquiring a share in family property. The Commissioner (Appeals) deleted the addition, accepting the assessee's claim that Rs. 5 lakhs was still payable to Smt. Jasrajpal Ghumman, supported by her certificate. The Tribunal, however, set aside the Commissioner (Appeals)'s order, restoring the assessing officer's addition. The Tribunal relied on the seized document, which indicated that the full payment had been made, and found the certificate filed by the assessee to be a self-serving statement.

3. Admission of Additional Ground Regarding Interest Deduction for AY 1999-2000:
The revenue sought to admit an additional ground, arguing that interest of Rs. 3,63,070 for AY 1999-2000 should not be allowed as a deduction u/s 69C. The Tribunal admitted the additional ground, noting that it was purely legal and all relevant facts were on record. However, the Tribunal ultimately found that the source of the interest payment was explained through the cash flow statement, and no addition under Section 69C was warranted.

4. Application u/s 154 of the Income Tax Act, 1961:
The assessee appealed against the Commissioner (Appeals)'s rejection of an application u/s 154, which sought to treat an addition of Rs. 1 lakh for household expenses as covered by the undisclosed income declared in the block return. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the issue was debatable and not a mistake apparent from the record, thus falling outside the scope of Section 154.

Conclusion:
The Tribunal partly allowed the revenue's appeal by restoring the addition of Rs. 5 lakhs for undisclosed investment in family property and dismissed the assessee's appeal regarding the application u/s 154. The deletion of Rs. 46,47,070 for interest paid from undisclosed sources was upheld, and the additional ground regarding interest deduction for AY 1999-2000 was admitted but ultimately not sustained.