2005 (11) TMI 172 - AT - Income Tax

Income From Undisclosed Sources - HELD THAT - The admitted facts of the case are that purchases were recorded in the regular books of account maintained. The purchases are supported by proper bills/vouchers. The assessee filed the necessary details regarding name, address, sales-tax number. The payments were made through banking channels. Thus, the sale against the purchases are not doubted. It is not the case of AO that amounts paid for purchases had come back to the assessee. We noticed that the AO had made addition merely on the ground that the suppliers are not located and they were not produced for examination. After considering the facts of the case we are of the view that when purchases are supported with authenticated purchase bills, having sales-tax numbers and payment through cheques, the addition cannot be made u/s 69 or 69A as in this section. Thus, we are of the considered view that the addition is not warranted. We accordingly delete the addition. In the result, the appeal is partly allowed.

Summary

Issues involved:
1. Unexplained cash/undisclosed income of Rs. 2,49,261.
2. Non-genuine expenses of Rs. 7,39,082.
3. Addition of Rs. 30,000 on account of household withdrawals.

Issue 1: Unexplained cash/undisclosed income of Rs. 2,49,261:
The appellant, a gold trader, disclosed excess stock of 500 gms of gold during a survey operation. The AO found unexplained cash of Rs. 2,49,261. The CIT(A) confirmed the addition, noting discrepancies in the appellant's explanations. The appellant claimed the cash pertained to gold sales, but the AO rejected this, citing lack of party details on bills. The AR argued the bills were prepared before the survey. The ITAT upheld an addition of Rs. 33,000, considering the appellant's failure to explain this amount, while deleting the balance.

Issue 2: Non-genuine expenses of Rs. 7,39,082:
The AO added Rs. 7,39,082 as unexplained investment based on purchases from two untraceable jewelers. The CIT(A) upheld the addition, emphasizing the lack of proof for the source of funds used in these purchases. The AR contended the purchases were genuine, supported by proper documentation and payments through cheques. The ITAT ruled in favor of the appellant, noting authenticated purchase bills, sales-tax numbers, and payments through banking channels, leading to the deletion of the addition.

Issue 3: Addition of Rs. 30,000 on account of household withdrawals:
The AO added Rs. 30,000 to household expenses, finding the declared expenses inadequate for nine family members. The CIT(A) upheld this addition. The ITAT, considering the sustained addition of Rs. 33,000 in another ground, deleted the Rs. 30,000 addition, concluding it was not warranted.

In conclusion, the ITAT partially allowed the appeal, upholding an addition of Rs. 33,000 for unexplained cash while deleting the remaining amount. The addition of Rs. 7,39,082 for non-genuine expenses was overturned due to proper documentation and payment proofs. Additionally, the Rs. 30,000 addition for household withdrawals was deleted. The ITAT directed the AO to make consequential adjustments for interest charges and dismissed grounds related to the burden of proof and evidence as not pressed.