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2016 (7) TMI 311 - AT - Income TaxScope of assessment u/s 158BD - Held that - Without any contrary evidence or incriminating material, AO had brought to tax the opening balance and some investments which are explained by the assessee in the cash flow statement. As can be seen from the orders, AO disbelieved certain investments without questioning the source of funds. Details of submissions made by the Ld. Counsel extracted in the above do indicate that for every investment made by the assessee there is corresponding source of the amount, so they cannot be considered as unexplained. It is to be noted that AO did not make any enquiry to disprove the source of funds. He has simply disbelieved the assessee s explanation, which cannot be accepted in the search proceedings, particularly, in the case of assessee where the proceedings are consequential u/s 158BD. The action of the AO in disbelieving the sources can also be evident from the additions made on the so-called investments in the Chit funds. Not only that assessee has explained that he has separate assessment in the status of HUF and some of the investments are made by the HUF, but, without disproving the same AO simply brought to tax all those investments also in the hands of assessee. There is evidence on record that assessee also offered incomes in HUF status, having its own sources of income and those were not disproved. In view of the above, keeping in mind the limited jurisdiction for making assessment u/s 158BD and the fact that assessee could explain various investments in cash flow statement itself which was accepted by the AO in the proceedings, we have no hesitation in allowing grounds taken by the assessee. Since all the investments brought to tax are either explained in the cash flow statement or belonging to third parties which have brought to tax as benami, we direct the AO to delete all of them - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of the undisclosed income determined by the Assessing Officer (AO). 2. Validity of the additions made by the AO for various assessment years. 3. Consideration of the evidence and materials found during the search and survey operations. 4. Justification of the AO's findings regarding benami transactions and investments. Issue-wise Detailed Analysis: 1. Legitimacy of the Undisclosed Income Determined by the AO: The AO initially determined the total undisclosed income at ?91,51,650/- after search and seizure operations. The assessee filed an appeal, and the Tribunal set aside the assessment, directing the AO to reconsider the case. Upon reassessment, the AO re-determined the undisclosed income at ?91,50,130/-, making the same additions as before. The Tribunal noted that the reassessment should be based on the seized material found during the search, as per Section 158BD, and found that many additions were not justified as they were not based on any incriminating material. 2. Validity of the Additions Made by the AO for Various Assessment Years: The Tribunal examined each addition year-wise: AY 1992-93: - Opening Cash Balance of ?1,51,241/-: The AO disbelieved the opening cash balance claimed by the assessee. The Tribunal found that the amount was already disclosed in the return of income filed before the search, and no evidence was found during the search to justify the addition. - Gifts Received (?6,07,852/-): The Tribunal noted that ?4,00,000/- was admitted by the assessee in the return of income. The remaining gifts were received by the assessee's wife and were admitted in her return of income. Hence, these should not be added to the assessee's income. AY 1993-94: - Investments in Ushodaya Oil Producers (?5,21,180/-): The Tribunal found no evidence to show that the investments made by Smt. M. Vijaya Lakshmi and Shri V. Chandra Mohan were actually made by the assessee. The partnership deed and other records confirmed their investments. - Investment in Balaji Oil Producers (?20,000/-): The Tribunal accepted the assessee's explanation that sufficient funds were available from the opening balance and agricultural income. - Investments in Chits (?13,850/-): The Tribunal accepted the explanation that the investments were made from available funds and not based on seized material. AY 1994-95: - Investments in Shares of Ushodaya Agro Products (?23,85,000/-): The Tribunal found that the investments were recorded in the receipts and payments account and were not based on seized material. The investments made by the assessee's wife and HUF were from their own sources. - Investment in Purchase of Property (?8,17,741/-): The Tribunal found no evidence to show that the investments were made by the assessee. - Investments in Chits (?85,000/-): The Tribunal accepted that these amounts were receipts from chit funds and not investments. - Investments in Plots at Shivnagar and Fort Road, Warangal (?1,48,040/-): The Tribunal found that the sources for acquisition were shown in the receipts and payments accounts. AY 1995-96: - Investments in Shares of Ushodaya Agro Products (?13,00,000/-): The Tribunal found that the investments were made through Demand Drafts and recorded in the receipts and payments account. The investments made by the assessee's wife were from her own sources. - Investments in Chits (?19,750/-): The Tribunal accepted that these amounts were recorded in the receipts and payments account. - Investments in Plots at Fort Road, Warangal (?5,16,800/-): The Tribunal found that the investments were made by the assessee's wife from her own sources. - Investment in Padmavathi Cotton Corporation (?35,000/-): The Tribunal found that this amount was shown in the receipts and payments account. AY 1996-97: - Investments in Shares of Ushodaya Agro Products (?11,51,000/-): The Tribunal found that the investments were recorded in the receipts and payments account. The investments made by Shri V. Chandra Mohan were from his own sources. - Investment in Purchase of Property (?14,22,071/-): The Tribunal found that the investments were made by the assessee's wife and others, and there was no evidence to show that the investments were made by the assessee. 3. Consideration of the Evidence and Materials Found During the Search and Survey Operations: The Tribunal emphasized that the scope of assessment under Section 158BD is limited to the seized material found during the search. The AO's additions were largely based on the cash flow statement and not on any incriminating material found during the search. The Tribunal found that many additions were made without any evidence or material to support them. 4. Justification of the AO's Findings Regarding Benami Transactions and Investments: The Tribunal found no evidence to support the AO's findings that the investments made by the assessee's wife and others were benami transactions. The Tribunal noted that the AO initiated separate proceedings under Section 147/158BD against these individuals, indicating that they had their own sources of income and were not benamis of the assessee. The Tribunal directed the AO to delete all such additions. Conclusion: The Tribunal allowed the assessee's appeal, directing the AO to delete all the additions made, as they were either explained in the cash flow statement or belonged to third parties and were not supported by any incriminating material found during the search. The Tribunal emphasized the limited jurisdiction for making assessments under Section 158BD and the need for evidence to support any additions.
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