2004 (1) TMI 298 - AT - Income Tax

Summary

Issues Involved:
1. Addition of cash found during the search.
2. Addition based on inadequacy of drawings.
3. Addition in respect of on-money payment for land purchase at Arsinakunte village.
4. Addition in respect of on-money payment for land purchase at Vishweshwarapura village.

Detailed Analysis:

1. Addition of Cash Found During the Search:
The search conducted under Section 132 of the IT Act, 1961, on 15th November 1999, revealed cash of Rs. 84,000 at the assessee's premises. The assessee explained that the cash belonged to his sons, Divyesh and Manish, who had received gifts and had sufficient cash balances as per their balance sheets. The Assessing Officer (AO) did not accept this explanation and added Rs. 84,000 as undisclosed income. The Tribunal found that the explanation provided by the assessee, supported by balance sheets and a letter dated 2nd December 1999, was reasonable. Therefore, the addition of Rs. 84,000 was deleted.

2. Addition Based on Inadequacy of Drawings:
The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] supported the addition on the ground of inadequacy of drawings. The Tribunal noted that for making an addition under Chapter XIV-B, the Department must find material showing undisclosed income in the form of specific drawings not recorded in the books. Since no such material was found, the addition based on inadequacy of drawings was also deleted.

3. Addition in Respect of On-Money Payment for Land Purchase at Arsinakunte Village:
The AO added Rs. 23,20,000 as undisclosed income based on statements from the land sellers, who admitted receiving on-money payments. The Tribunal noted that the addition was not supported by any seized material or direct evidence. The real buyer was Kirthi Kumar Maru, who paid the consideration through a demand draft from Gujarat. The Tribunal found that the Department's reliance on the statement of Nanjappa, who was not the seller, and the absence of examination of the actual seller, Smt. Jayamma, weakened the case. The Tribunal also observed that the alleged on-money payments were not corroborated by any material found during the search. Therefore, the addition of Rs. 23,20,000 was deleted.

4. Addition in Respect of On-Money Payment for Land Purchase at Vishweshwarapura Village:
The AO added Rs. 15,80,000 as undisclosed income based on statements from vendors and seized material. The Tribunal found inaccuracies in the computation of on-money payments and noted that no material was found during the search to support the addition. The seized documents did not implicate the assessee, and the statements from vendors were recorded without giving the assessee an opportunity for cross-examination. The Tribunal concluded that the addition was based on presumptions and conjectures without corroborative evidence. Therefore, the addition of Rs. 15,80,000 was deleted.

Conclusion:
The Tribunal allowed the appeal, deleting all the additions made by the AO and CIT(A) due to the lack of supporting evidence and the reliance on presumptions and conjectures.