2000 (2) TMI 191 - AT - Income Tax

Summary

Issues Involved:
1. Validity of treating income for assessment years 1987-88 and 1988-89 as undisclosed.
2. Validity of treating income for assessment years 1995-96 and 1996-97 as undisclosed due to late filing.
3. Validity of treating proportionate income from 1st April 1996 to 10th October 1996 as undisclosed.
4. Validity of treating certain jewelry as undisclosed income in the case of Smt. Rita Aggarwal.

Detailed Analysis:

1. Validity of Treating Income for Assessment Years 1987-88 and 1988-89 as Undisclosed:
The assessee argued that the Assessing Officer (AO) wrongly treated the income of Rs. 18,400 and Rs. 18,500 for the assessment years 1987-88 and 1988-89 as undisclosed. The assessee provided proof of having filed returns for these years, which the AO ignored. The Tribunal found that the assessment orders for these years were completed well before the date of the search and thus it was unjustifiable for the AO to treat the income as undisclosed. Consequently, the Tribunal deleted the addition of Rs. 36,900 as undisclosed income for these years.

2. Validity of Treating Income for Assessment Years 1995-96 and 1996-97 as Undisclosed Due to Late Filing:
The AO treated the income for the assessment years 1995-96 and 1996-97 as nil because the returns were filed beyond the time stipulated under Section 139(1) of the IT Act. The Tribunal noted a typographical error in the AO's computation for the year 1995-96, which should be Rs. 2,26,408 instead of Rs. 2,64,408. The Tribunal referenced previous case law, which held that failure to file returns on time does not automatically render the income as undisclosed if the income sources were known to the Department. The Tribunal concluded that the AO was not justified in treating the belatedly filed income for these years as undisclosed and deleted the additions.

3. Validity of Treating Proportionate Income from 1st April 1996 to 10th October 1996 as Undisclosed:
The AO added Rs. 1,84,716 as undisclosed income for the period from 1st April 1996 to 10th October 1996, based on the income shown for the assessment year 1996-97. The Tribunal found that the return for the assessment year 1997-98 was due in June 1997 and had been filed by the assessee on 24th October 1997, before the assessment order was framed. Thus, the Tribunal held that this amount could not be treated as undisclosed income for the block period and deleted the addition.

4. Validity of Treating Certain Jewelry as Undisclosed Income in the Case of Smt. Rita Aggarwal:
The AO found jewelry worth Rs. 11,04,177 during the search, of which Rs. 4,69,832 was attributed to the assessee. The assessee provided details of the jewelry, including items inherited and owned by family members. The AO rejected the explanations for various reasons, including the non-genuineness of a will and the implausibility of the valuation report.

- 495.300 grams of jewelry: The Tribunal accepted the explanation based on the CBDT Circular, which allows 500 grams of jewelry for a married lady. The Tribunal deleted the addition for this portion.
- 125.700 grams of jewelry from Smt. Dropdi Devi: The Tribunal upheld the AO's rejection of the will and valuation report, treating this jewelry as undisclosed income.
- 58 grams of jewelry attributed to Satish Aggarwal: The Tribunal did not accept the explanation due to the nature of the jewelry not being exclusively for men.
- 93.600 grams of jewelry attributed to daughters: The Tribunal rejected the explanation based on the assessee's initial statement that all jewelry belonged to her.
- 2 kg of silver: The Tribunal did not specifically address this in the detailed analysis.

The Tribunal concluded that the AO was justified in treating the jewelry exceeding 500 grams as undisclosed income, except for the portion that could be justified under the CBDT Circular. The Tribunal partially allowed the appeal for Smt. Rita Aggarwal by confirming the addition of Rs. 1,58,790 for the 125.700 grams of jewelry but deleting the rest.

Conclusion:
The Tribunal allowed the appeal for Amarnath Aggarwal by deleting all additions of undisclosed income. For Smt. Rita Aggarwal, the Tribunal partially allowed the appeal by deleting some additions but confirming others, particularly for the jewelry attributed to Smt. Dropdi Devi.