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2005 (8) TMI 290 - AT - Income Tax


Issues Involved:
1. Action under Section 132 of the IT Act, 1961.
2. Additions in respect of unaccounted investments in Bhayandar land.
3. Additions on account of unexplained investment in jewellery.
4. Additions on account of unexplained cash.
5. Additions towards alleged unexplained investment in M/s Hindustan Marbles.
6. Additions on account of alleged suppression of sale of ghee.
7. Claim of bad debt of Rs. 14,07,500.

Detailed Analysis:

1. Action under Section 132 of the IT Act, 1961:

Action under s. 132 of the IT Act, 1961, was conducted in the business as well as the residential premises of the appellant group on 10th Dec., 1998, during which certain documents, books of account, and other valuables including cash and jewellery were found and seized. Statements under s. 132(4) were recorded, and the main person of the group-assessee admitted to unaccounted income of Rs. 1.75 crores, which was later retracted on grounds of coercion and lack of proper opportunity to examine the seized materials.

2. Additions in respect of unaccounted investments in Bhayandar land:

The Department made additions based on the statement of a third party, Shri J.P. Achnani, and the initial admission of the assessee, which was later retracted. The assessee argued that the statement was not voluntary and was extracted under pressure. The Tribunal found that the Department did not conduct independent enquiries to corroborate the statements and violated principles of natural justice by not providing a proper opportunity for cross-examination. The Tribunal concluded that no addition could be made based on uncorroborated statements and deleted the additions.

3. Additions on account of unexplained investment in jewellery:

The AO taxed the balance jewellery found during the search after allowing the benefit as per CBDT Circular No. 1916. The assessee argued that the disclosed amount of Rs. 25,93,595 in the hands of M/s Modern Dairy & Ice Plant should cover any discrepancies. The Tribunal agreed with the assessee and directed that the additions be deleted by allowing adjustment against the disclosed amount.

4. Additions on account of unexplained cash:

Similar to the unexplained jewellery, the AO made additions for unexplained cash. The Tribunal found that there was enough scope for telescoping these amounts against the disclosure made by M/s Modern Dairy & Ice Plant and deleted the additions.

5. Additions towards alleged unexplained investment in M/s Hindustan Marbles:

The AO made an addition based on an unsigned MoU and the statement of the assessee. The Tribunal found that the addition was similar to the unexplained cash and jewellery issues and allowed adjustment against the disclosed amount by M/s Modern Dairy & Ice Plant, deleting the addition.

6. Additions on account of alleged suppression of sale of ghee:

The AO made additions based on rough notings in seized documents. The Tribunal found that these documents were not reliable as they were maintained by floor-level staff and not verified by the AO. The Tribunal accepted the assessee's explanation of re-circulation of manufactured ghee and deleted the addition.

7. Claim of bad debt of Rs. 14,07,500:

The assessee claimed bad debt based on certain seized documents. The Tribunal upheld the lower authorities' rejection of the claim, stating that since the loans were not recorded in proper books of account nor written off therein, there was no scope for allowing the same under s. 36(1)(vii). The Tribunal dismissed the appellate ground on this issue.

Conclusion:

The Tribunal allowed the appeals filed by the individual assessees and M/s Arora Construction & Developers, and M/s Modern Cream Dairy Industries (P) Ltd., while the appeal filed by M/s Modern Dairy & Ice Plant was partly allowed.

 

 

 

 

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