1999 (8) TMI 104 - AT - Income Tax

Summary

Issues Involved:
1. Conduct of the Departmental Representative.
2. Double Additions in the cases of three firms.
3. Allocation of Excess Stock.
4. Miscellaneous Receivables and Liquid Assets.
5. Double Additions in the cases of three partners.
6. Household Expenses.
7. Unexplained Silver Utensils.
8. Unexplained Cash.
9. Unaccounted Investments in Shops.
10. Capital Gains in the case of Shri Ishwarlal Jariwala.
11. Denial of Opportunity by the CIT.

Detailed Analysis:

1. Conduct of the Departmental Representative:
The Tribunal expressed regret over the conduct of the Departmental Representative, Shri A.K. Singh, who requested adjournments multiple times and misrepresented facts in his letters. The Tribunal found his behavior highly unbecoming of a Government officer.

2. Double Additions in the cases of three firms:
The Tribunal addressed the grievances of the three firms, namely B.M. Silk Mills, M. Rajendra & Co., and Akshay Fabrics, regarding double additions. The AO had included amounts already shown as part of returned income and further excess stock when there was no such excess as per the final bifurcation of the disclosure amount.

3. Allocation of Excess Stock:
During the search operations, combined stock was inventorized for the three firms. The Tribunal found no valid reason for the AO to allocate the entire unaccounted stock only between B.M. Silk Mills and M. Rajendra & Co., excluding Akshay Fabrics. The Tribunal accepted the revised disclosure by the group, which included Rs. 3 lakhs for Akshay Fabrics, and found it justified.

4. Miscellaneous Receivables and Liquid Assets:
The AO did not exclude miscellaneous items from the disclosure, considering them as actual receivables and liquid assets. The Tribunal found substance in the assessee's contention that these were balancing figures to round up the disclosed amount to Rs. 75 lakhs. No evidence was found to prove the existence of such receivables or assets, and the Tribunal accepted the revised disclosure excluding these items.

5. Double Additions in the cases of three partners:
The Tribunal addressed the issue of double additions in the cases of Mahesh I. Jariwala, Rajendra I. Jariwala, and Bharat I. Jariwala. The AO had included unexplained assets found at the residence of the partners in the firm's income and again in the partners' income under s. 28(iv). The Tribunal found this unjustified, as the assets belonged to the partners and were acquired from the firm's undisclosed income. The Tribunal deleted the double additions.

6. Household Expenses:
The AO had made additions for low withdrawals for household expenses in the cases of the three partners and their father. The Tribunal found the household expenses shown by the family members inadequate and modified the additions to reasonable estimates.

7. Unexplained Silver Utensils:
The AO had made additions for silver utensils found during the search. The Tribunal deleted these additions, considering the family's status and traditions.

8. Unexplained Cash:
The AO had made additions for unexplained cash found at the residences of Bharatbhai and Ishwarlal. The Tribunal accepted the explanation that the cash represented savings and gifts and deleted the additions.

9. Unaccounted Investments in Shops:
The AO had allocated unexplained investments in shops equally among the three brothers and their father. The Tribunal dismissed this ground as it was not pressed by the learned counsel.

10. Capital Gains in the case of Shri Ishwarlal Jariwala:
The AO had added capital gains for the transfer of land to a partnership firm. The Tribunal found that the issue of capital gains did not spring from the seized material and was beyond the purview of block assessment. The Tribunal deleted the addition, citing legal grounds and merits, including the non-applicability of s. 45(3) for the relevant assessment year.

11. Denial of Opportunity by the CIT:
This ground was not pressed by the learned counsel and was dismissed by the Tribunal.

Conclusion:
The Tribunal partly allowed the seven appeals filed by the assessees, providing relief on several grounds while dismissing others. The Registry was directed to send a copy of the order to the CBDT and Chief CIT, Ahmedabad.