1998 (3) TMI 182 - AT - Income Tax

Summary

Issues Involved:
1. Sustaining the addition of Rs. 4,510 out of the cash found at the residence.
2. Sustaining the addition of Rs. 5,000 on account of investment in NSC.
3. Sustaining the addition of Rs. 1,05,502 representing unexplained entries found recorded on loose papers at the time of search.

Issue-wise Detailed Analysis:

1. Sustaining the addition of Rs. 4,510 out of the cash found at the residence:

The facts reveal that during a search and seizure operation on 19th Sept., 1989, cash amounting to Rs. 44,510 was found at the assessee's residence. The assessee had surrendered Rs. 1,20,000 as "on money" received from the sale of a house and declared this in the return filed. The remaining Rs. 4,510 was claimed to belong to the assessee's wife, Smt. Shanti Devi. The AO treated this amount as income from an undisclosed source since no such claim was made at the time of the search. The CIT(A) confirmed this addition. However, the Tribunal found that Smt. Shanti Devi, being a housewife in a business family, could have saved this amount from household withdrawals and social presents. Given the small amount involved and customary savings in Hindu families, the Tribunal directed the deletion of this addition.

2. Sustaining the addition of Rs. 5,000 on account of investment in NSC:

During the search, NSCs worth Rs. 15,000 were found, including Rs. 5,000 related to the current assessment year. The AO added this as unexplained investment since the assessee failed to explain the source or claim deduction in the return. The CIT(A) confirmed this addition. The assessee's counsel argued that the amount came from the rental income of the assessee's wife, Smt. Shanti Devi, who had gifted Rs. 4,000 in 1987-88, Rs. 6,000 in 1988-89, and Rs. 5,000 in 1989-90. The Tribunal found that the affidavit filed by Smt. Shanti Devi was uncontroverted by the Revenue. Additionally, a similar addition in the earlier assessment year was deleted by the Tribunal. Therefore, the Tribunal directed the deletion of the Rs. 5,000 addition.

3. Sustaining the addition of Rs. 1,05,502 representing unexplained entries found recorded on loose papers at the time of search:

The AO made an addition of Rs. 1,05,502 based on various entries in loose papers found during the search, considering them as income from undisclosed sources. The CIT(A) confirmed this addition, directing the AO to verify a typographical error regarding an addition of Rs. 26,500 instead of Rs. 35,000. The assessee's counsel argued that these documents neither belonged to nor related to the assessee, and were possibly left by customers. The Tribunal noted that the documents contained details of transactions related to the assessee's business of goldsmithy, including household purchases and gold ornaments transactions. The Tribunal held that the documents belonged to the assessee as he failed to rebut the presumption under s. 132(4A). However, the Tribunal found that the total amount due for recovery was Rs. 10,500, not Rs. 26,500 or Rs. 35,000. Additionally, the Tribunal noted unexplained expenses of Rs. 10,000 and unexplained investment in gold ornaments and income from manufacturing of ornaments amounting to Rs. 20,000. Consequently, the Tribunal sustained a total addition of Rs. 30,500 and directed the deletion of the balance amount.

Conclusion:

The appeal was partly allowed. The Tribunal directed the deletion of the additions of Rs. 4,510 and Rs. 5,000, and sustained a total addition of Rs. 30,500 out of the initially added Rs. 1,05,502.