1999 (12) TMI 94 - AT - Income Tax

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Addition of Rs. 2,50,000 on account of unexplained cash found during the search.
3. Addition of Rs. 4,63,000 on account of alleged undisclosed/unexplained household expenses.
4. Disallowance of deduction claimed by the assessee in respect of returned/assessed income of Rs. 12,21,105.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The assessee contended that the Assessing Officer (AO) passed the order in violation of the principles of natural justice. However, the authorized representative of the assessee did not press this ground. Consequently, this ground was dismissed as not pressed.

2. Addition of Rs. 2,50,000 on Account of Unexplained Cash Found:
The AO made an addition of Rs. 2,50,000 based on the cash found during the search operation. The assessee initially admitted that the cash belonged to him but later claimed that Rs. 1,50,000 belonged to the company M/s Electrotherm (India) Ltd., Rs. 20,000 was a tour advance, and the remaining cash belonged to his wife and daughter.

The Tribunal found that the assessee's initial statement during the search, where he admitted the cash belonged to him, was more credible than his later explanations. However, the Tribunal accepted that Rs. 76,000 found in the locker belonged to the wife and daughter, as initially claimed. Therefore, the addition was sustained to the extent of Rs. 1,50,000, and the assessee was given relief for the remaining amount.

3. Addition of Rs. 4,63,000 on Account of Alleged Undisclosed/Unexplained Household Expenses:
The AO based the addition on the statement of the assessee's wife, who estimated their household expenses at Rs. 20,000 per month. The assessee clarified that this estimate included reimbursed expenses like telephone bills, car expenses, etc., and that actual household expenses were Rs. 5,000 per month.

The Tribunal noted that the AO did not provide concrete evidence to justify the addition and accepted the assessee's explanation regarding the inclusion of reimbursed expenses. However, considering the cash found during the search and the standard of living, the Tribunal found it reasonable to sustain an addition of Rs. 50,000 for unexplained household expenses, granting relief for the remaining amount.

4. Disallowance of Deduction Claimed in Respect of Returned/Assessed Income of Rs. 12,21,105:
The AO disallowed the deduction on the grounds that the returns for certain years were not filed within the prescribed time. The assessee argued that the income was from salary, with TDS deducted, and should not be considered undisclosed.

The Tribunal agreed with the assessee, stating that the income declared in the returns, though filed belatedly, could not be considered undisclosed income. The Tribunal directed the AO to exclude this income from the block period and assess it under regular assessment procedures.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the addition of Rs. 1,50,000 for unexplained cash and Rs. 50,000 for unexplained household expenses, while providing relief for the remaining amounts and directing the AO to exclude Rs. 12,21,105 from the block period assessment.