1999 (6) TMI 48 - AT - Income Tax

Summary

Issues Involved:
1. Determination of undisclosed income of Rs. 4,05,840 based on seized documents (Annexure A-1).
2. Determination of undisclosed income of Rs. 2,73,283 based on seized documents (Annexure A-2).
3. Determination of undisclosed income of Rs. 1,63,395 based on seized documents (Annexure A-3).
4. Estimation of undisclosed income for the period not covered by seized documents.

Summary:

I. Determination of undisclosed income of Rs. 4,05,840 based on seized documents (Annexure A-1):
The appellant objected to the assessment of undisclosed income of Rs. 4,05,840 based on seized documents marked as Annexure A-1. The AO did not accept the appellant's explanation that the amounts recorded against her name were actually investments made by her husband, Dr. B.N. Tripathi, for the construction of 'Ved Ashram'. The AO concluded that the entries represented the appellant's undisclosed income. The Tribunal agreed with the AO, noting inconsistencies in the appellant's claims and the lack of evidence to support her explanation. The Tribunal upheld the assessment of Rs. 4,05,840 as the appellant's undisclosed income.

II. Determination of undisclosed income of Rs. 2,73,283 based on seized documents (Annexure A-2):
The appellant declared an undisclosed income of Rs. 8,92,252 based on seized documents marked as Annexure A-2 but claimed a deduction for expenses of Rs. 2,73,283. The AO rejected the claim for expenses, citing lack of evidence and inconsistencies in the appellant's explanations. The Tribunal, however, held that if receipts in a document are considered as income, then expenses recorded against those receipts should also be allowed as deductions unless proven otherwise. The Tribunal directed the AO to allow the deduction of Rs. 2,73,283 and compute the undisclosed income as Rs. 8,92,252, as declared by the appellant.

III. Determination of undisclosed income of Rs. 1,63,395 based on seized documents (Annexure A-3):
The appellant declared an undisclosed income of Rs. 71,450 based on seized documents marked as Annexure A-3, while the AO computed it as Rs. 1,36,395. The Tribunal found that the AO's method of estimation was not justified and directed that the undisclosed income should be computed by taking 20% of gross receipts as recorded in Annexure A-3 and allowing the actual expenditure recorded. The AO was directed to recompute the undisclosed income accordingly.

IV. Estimation of undisclosed income for the period not covered by seized documents:
The AO estimated the appellant's undisclosed income for a period of 9 months, for which there were no details in the seized documents, based on the average monthly undisclosed income found in the documents. The Tribunal held that the provisions of s. 145 are not applicable to assessments for block periods and that undisclosed income should be determined strictly based on documents found during the search. The Tribunal directed the AO to delete the estimated undisclosed income of Rs. 17,00,000 and consider only the income based on the seized documents, i.e., Rs. 8,92,252 as already held.

Conclusion:
The Tribunal partly allowed the assessee's appeal, directing adjustments to the undisclosed income computations based on the principles outlined above.