1999 (7) TMI 100 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the block assessment order.
2. Addition of Rs. 10 lacs as undisclosed income.
3. Addition of Rs. 4,500 and Rs. 1,000 as undisclosed investments.

Summary:

1. Legality of the Block Assessment Order:
The assessee contested the block assessment order u/s 158BC(c) as arbitrary and illegal, violating principles of natural justice and fair play. The Tribunal noted that the assessee was not confronted with the Rs. 10 lacs payment until 21-8-1997, and the relevant documents were not provided to the assessee. However, the Tribunal concluded that these procedural lapses did not render the assessment order illegal but could affect the merits of the case. Accordingly, ground Nos. 1 and 2 of the appeal failed.

2. Addition of Rs. 10 lacs as Undisclosed Income:
The Assessing Officer added Rs. 10 lacs as undisclosed income based on a document (page 397 of Annexure A-2) seized from the residence of Shyam Lutheria. The Tribunal considered the statement of Mr. P.R. Pandiya, who explained the entry but did not confirm the payment to the assessee. The Tribunal emphasized that the entry was on a loose sheet, not found in the assessee's possession, and lacked corroborative evidence. The Tribunal cited several judicial pronouncements, including V.C. Shukla's case, which held that loose sheets cannot fix liability without independent evidence. The Tribunal concluded that the addition of Rs. 10 lacs as undisclosed income was unwarranted and unjustified, and thus deleted the addition.

3. Addition of Rs. 4,500 and Rs. 1,000 as Undisclosed Investments:
[These paras are not reproduced here as they involve minor issues.]

Conclusion:
The Tribunal found procedural lapses in the block assessment but did not deem them sufficient to invalidate the order. However, the addition of Rs. 10 lacs as undisclosed income was deleted due to lack of corroborative evidence and procedural fairness.