1999 (10) TMI 92 - AT - Income Tax

Issues Involved:
1. Conversion of survey proceedings into search proceedings.
2. Approval by CIT to the assessment order.
3. Addition of Rs. 1,69,50,812.
4. Addition of Rs. 13,98,514 and Rs. 22,49,643 as unexplained investment on account of purchase of paddy.
5. Various additions including Rs. 4.35 lakhs, Rs. 5.97 lakhs, Rs. 3.81 lakhs, Rs. 70,000, Rs. 1,60,550, Rs. 4,95,415, and Rs. 10 lakhs on account of cash found.

Summary:

1. Conversion of Survey Proceedings into Search Proceedings and Approval by CIT:
Ground Nos. 1 and 2 regarding the conversion of survey proceedings into search proceedings and the approval by CIT to the assessment order were not pressed by the learned counsel and were thus rejected.

2. Addition of Rs. 1,69,50,812:
The AO added Rs. 1,69,50,812 as undisclosed income based on the unaccounted production and sale of rice bran and other by-products. The Tribunal found that the AO's calculations were based on conjectures and surmises without any corroborative evidence such as electricity bills, labor charges, or purchase of gunny bags. The addition of Rs. 1,69,50,812 was deleted, but an addition of Rs. 60,000 was sustained for the sale of rice bran valued at Rs. 3,18,345.

3. Addition of Rs. 13,98,514 and Rs. 22,49,643:
The AO made additions of Rs. 13,98,514 and Rs. 22,49,643 as unexplained investments for the purchase of paddy based on certain documents. The Tribunal found that the AO's conclusions were based on surmises and conjectures without any material evidence. The additions were deleted.

4. Various Additions:
- Rs. 4.35 lakhs: The AO treated Rs. 4.35 lakhs as unexplained investment u/s 69. The Tribunal found that the documentary evidence provided by the assessee was not dislodged by the AO. The addition was deleted.

- Rs. 5.97 lakhs: The AO added Rs. 5.97 lakhs based on certain goods receipts. The Tribunal found that the assessee provided confirmations and relevant ledger entries. The addition was deleted.

- Rs. 3.81 lakhs: The AO added Rs. 3.81 lakhs based on a document considered a "dumb document." The Tribunal, relying on case law, deleted the addition.

- Rs. 70,000: The AO added Rs. 70,000 based on a document found during the search. The Tribunal sustained this addition.

- Rs. 1,60,550: The AO added Rs. 1,60,550 based on certain entries not found in the regular books. The Tribunal decided to telescope this addition against the peak of Rs. 21 lakhs.

- Rs. 4,95,415: The AO added Rs. 4,95,415 as unexplained investment for the purchase of paddy. The Tribunal decided to telescope this addition against the peak of Rs. 21 lakhs.

- Rs. 10 lakhs on account of cash found: The AO added Rs. 10 lakhs as unexplained cash found during the search. The Tribunal found that the circumstantial evidence and preponderance of probabilities were in favor of the assessee. The addition was deleted.

5. Telescoping of Various Additions:
The Tribunal considered the cash flow account and found that the peak amount was between Rs. 20-21 lakhs, with Rs. 13 lakhs surrendered before 31st March 1993. An addition of Rs. 8 lakhs plus Rs. 60,000 on account of trading in rice bran and Rs. 70,000 on account of cash payment was sustained, totaling Rs. 9.30 lakhs.

Conclusion: The appeal was allowed in part, with a total addition of Rs. 9.30 lakhs sustained.

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