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Issues Involved:
1. Rate of interest on pawned jewellery. 2. Addition on account of foreign gifts. Detailed Analysis: 1. Rate of Interest on Pawned Jewellery Background: The assessee and the Department both appealed against the order of the CIT(A), Jalandhar, regarding the rate of interest on pawned jewellery for the assessment year 1994-95. The assessee showed an interest rate of 18%, while the AO enhanced it to 24% based on seized material. The CIT(A) reduced it to 21%. Assessee's Argument: The assessee argued that the interest rate was 18% as recorded in the regular books of accounts, which had no defects. The assessee also cited a similar case where the Settlement Commission accepted an 18% interest rate. Department's Argument: The Department contended that the slips found during the search showed a 2% per month interest rate, justifying the 24% annual rate applied by the AO. They argued that the CIT(A) reduced the rate without substantial evidence. Tribunal's Findings: - Seized Material Examination: The Tribunal noted that 32 slips were found, with varying interest rates: some at 1.5% per month, some at 2%, and many with no rate mentioned. - Past Precedents: The Tribunal considered the Settlement Commission's decision in similar cases, where an 18% rate was accepted. - Conclusion: The Tribunal found that the CIT(A) had no basis for applying a 21% rate. Given the evidence, the Tribunal directed the AO to accept the 18% rate shown by the assessee. Judgment: The Tribunal allowed the assessee's appeal and dismissed the Department's appeal on this issue. 2. Addition on Account of Foreign Gifts Background: The AO noticed a credit entry of Rs. 1,83,922 in the assessee's bank account, claimed as a gift from an individual in the UK. The AO added this amount as unexplained cash credit, doubting the genuineness of the gift. Assessee's Argument: The assessee provided a confirmation letter from the donor, who held a responsible position in a UK company. The assessee cited a similar case where the Tribunal accepted foreign gifts based on affidavits and banking evidence. Department's Argument: The Department argued that the assessee failed to prove the donor's capacity and the genuineness of the gift, suggesting it was a hawala transaction. Tribunal's Findings: - Evidence Provided: The Tribunal noted that the gift was received through banking channels, with no evidence that the assessee sent money abroad to be returned as a gift. - Past Precedents: The Tribunal referenced its earlier decision and other case laws where gifts received through proper channels were accepted. - Conclusion: The Tribunal found no justification for the AO's addition, as the Department failed to provide evidence of the gift being a hawala transaction. Judgment: The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,83,922. Final Outcome: The assessee's appeal was allowed, and the Department's appeal was dismissed.
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