1999 (5) TMI 44 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 1,24,500 as unexplained election expenditure for AY 1978-79.
2. Addition of Rs. 90,000 plus interest as unexplained investment for AY 1979-80.
3. Addition of interest on Rs. 90,000 for AYs 1980-81 and 1981-82.
4. Addition of Rs. 10,000 based on a cheque counterfoil for AY 1984-85.
5. Addition of Rs. 1,51,837 based on a Dharam Kanta receipt for AY 1984-85.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,24,500 as unexplained election expenditure for AY 1978-79:
The assessee, a doctor and politician, was subject to a search operation under section 132(1) of the IT Act, 1961. During the search, a notebook was found indicating election expenditure of Rs. 1,24,500. The AO added this amount to the assessee's income as unexplained expenditure. The assessee contended that only Rs. 14,000 was spent by him, which was accepted by the Election Tribunal, and the rest was spent by party workers. The CIT(A) deleted the addition, noting that the AO did not examine the persons listed by the assessee. The Tribunal found that the AO failed to investigate properly and directed the AO to re-examine the matter by summoning the concerned persons.

2. Addition of Rs. 90,000 plus interest as unexplained investment for AY 1979-80:
During the search, a paper indicating computation of compound interest on Rs. 90,000 was found. The AO added this amount plus interest to the assessee's income, relying on section 132(4A). The assessee denied any connection with the paper, stating it was not in his handwriting and was on the pad of Sahkari Grah Nirman Samiti Ltd. The CIT(A) deleted the addition, noting the lack of evidence linking the assessee to the document. The Tribunal directed the AO to investigate further by summoning relevant persons from the cooperative society.

3. Addition of interest on Rs. 90,000 for AYs 1980-81 and 1981-82:
The AO made additions for interest on Rs. 90,000 in subsequent years based on the same paper. The CIT(A) deleted these additions, and the Tribunal upheld this decision, directing the AO to conduct necessary investigations to establish any link between the assessee and the investment.

4. Addition of Rs. 10,000 based on a cheque counterfoil for AY 1984-85:
A cheque counterfoil for Rs. 5,000 from Indian Overseas Bank was found during the search. The AO added Rs. 10,000 to the assessee's income, assuming the assessee was the benamidar of the account. The CIT(A) deleted the addition, noting the AO's failure to identify the actual account holder. The Tribunal confirmed the deletion, citing a report indicating the account belonged to another individual, with no evidence linking the assessee to the account.

5. Addition of Rs. 1,51,837 based on a Dharam Kanta receipt for AY 1984-85:
A Dharam Kanta receipt for weighing 80.550 grams of gold was found. The AO added Rs. 1,51,837 to the assessee's income, assuming he acquired the gold. The assessee denied any connection with the receipt. The CIT(A) deleted the addition, but the Tribunal found the addition justified, directing the AO to calculate the value based on the prevailing rate at the time of the receipt.

Conclusion:
The Tribunal allowed the appeals for statistical purposes for AYs 1978-79 to 1981-82, directing further investigation by the AO. For AY 1984-85, the Tribunal partly allowed the appeal, confirming the deletion of Rs. 10,000 but upholding the addition for the Dharam Kanta receipt with directions for recalculating the value.

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