2003 (9) TMI 291 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 2 lacs on account of unexplained advance.
2. Deletion of addition of Rs. 1,48,713 on account of unexplained investment in the purchase of land.
3. Deletion of addition of Rs. 78,851 on account of unexplained expenditure.
4. Deletion of addition of Rs. 1,23,732 on account of unexplained investment in the purchase of jewellery.
5. Deletion of addition of Rs. 20,000 on account of unexplained deposit in the bank.

Detailed Analysis:

1. Deletion of Addition of Rs. 2 Lacs on Account of Unexplained Advance:
The first issue pertains to the deletion of an addition of Rs. 2 lacs made by the Assessing Officer (AO) on account of an advance given to Sh. G.D. Sharma. The AO questioned the transaction due to the improbability of the drafts being presented in Barauni on the same day they were issued in Jalandhar. The assessee contended that the drafts were handed over to Sh. G.D. Sharma in Jalandhar, and the mention of Barauni on the receipt was a mistake. The Commissioner of Income-tax (Appeals) [CIT(A)] found no reason to doubt the transaction merely because of the place mentioned on the receipt and deleted the addition. The Appellate Tribunal upheld the CIT(A)'s decision, noting that the AO did not verify the facts from the relevant banks or summon Sh. G.D. Sharma, thus making the addition based on conjecture.

2. Deletion of Addition of Rs. 1,48,713 on Account of Unexplained Investment in the Purchase of Land:
The second issue involves the deletion of an addition of Rs. 1,48,713 made by the AO as unexplained investment in the purchase of land in the name of the assessee's minor son. The assessee provided detailed sources for the investment, including loans from family members and withdrawals from bank accounts. The CIT(A) verified these sources and found them credible, thus deleting the addition. The Tribunal agreed with the CIT(A), noting that the explanation given by the assessee was supported by evidence on record and upheld the deletion.

3. Deletion of Addition of Rs. 78,851 on Account of Unexplained Expenditure:
The third issue concerns the deletion of an addition of Rs. 78,851 made by the AO on account of unexplained expenditure related to the construction of a factory building. The AO based this addition on loose sheet papers and did not bifurcate the expenses between factory setup and household expenses. The CIT(A) found that some expenses were related to M/s Hiteshi Rubber Works and household expenses were covered by agricultural income. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to give credit for agricultural income and incorrectly attributed expenses to the assessee.

4. Deletion of Addition of Rs. 1,23,732 on Account of Unexplained Investment in the Purchase of Jewellery:
The fourth issue deals with the deletion of an addition of Rs. 1,23,732 made by the AO on account of unexplained investment in jewellery. The AO doubted the ownership of a 'Har' claimed to belong to the assessee's mother-in-law and did not allow for impurities in the jewellery. The CIT(A) accepted the assessee's explanation, supported by an affidavit from the mother-in-law, and directed that any addition should be made in the hands of the assessee's wife, who was a regular income-tax and wealth-tax assessee. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to verify the facts and the jewellery was already declared in the wife's wealth-tax returns.

5. Deletion of Addition of Rs. 20,000 on Account of Unexplained Deposit in the Bank:
The fifth issue pertains to the deletion of an addition of Rs. 20,000 made by the AO on account of an unexplained deposit in the bank. The assessee explained that the amount was received from the UTI as proceeds of a ULIP policy, and the original counter-foil was confiscated during the raid. The CIT(A) found this explanation credible and deleted the addition. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide any reason to doubt the explanation.

Conclusion:
In conclusion, the Tribunal upheld the CIT(A)'s decisions on all issues, finding that the AO's additions were based on conjecture and not supported by adequate verification or evidence. All three Departmental appeals were dismissed.