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2002 (12) TMI 203 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 1,55,669 as undisclosed income from deposits in Banaras State Bank Ltd.
2. Addition of Rs. 18,17,410 as unexplained investment in shares of Alankit Assignment Ltd.

Detailed Analysis:

Issue 1: Addition of Rs. 1,55,669 as undisclosed income from deposits in Banaras State Bank Ltd.

The appellant contested the addition of Rs. 1,55,669 being the peak credit of the cash entries in their savings bank account with Banaras State Bank Ltd. The AO added this amount on the basis that the bank account, although recorded in the appellant's regular books of accounts, was not explained in any regular assessment. The appellant argued that the bank account was disclosed year after year in their regular books of accounts and balance sheets filed with returns before the date of search. The appellant also provided explanations for each entry in the bank account and contended that the bank passbook was not seized during the search, as evidenced by the Panchnama. The Tribunal noted that the bank account was indeed reflected in the balance sheets filed with the returns before the date of search and that all entries in the bank account were supported by entries in the cash book maintained by the appellant. However, since the bank account papers were found during the search, the AO had the right to examine the same under Chapter XIV-B. The Tribunal set aside this issue, directing the AO to examine the sources of the bank deposits and allow the appellant reasonable opportunity to file necessary evidence to support their claim. This ground of appeal was partly allowed for statistical purposes.

Issue 2: Addition of Rs. 18,17,410 as unexplained investment in shares of Alankit Assignment Ltd.

The appellant contested the addition of Rs. 18,17,410, which represented the difference between the actual sale consideration of Rs. 10 per share for 2,59,630 shares of Alankit Assignment Ltd. during the financial year 1995-96 and the sale consideration of Rs. 3 per share appearing in the seized transfer deeds. The AO assumed that the appellant must have made the payment at the time of acquiring the shares and found it unnatural that shareholders would transfer shares at Rs. 3 per share after purchasing them at Rs. 10 per share four years earlier. The AO rejected the appellant's explanation that the mentioning of Rs. 3 was a clerical mistake and treated the difference as unexplained investment. The appellant argued that the purchase of shares at Rs. 10 per share was recorded in their account books during the financial year 1995-96, which were seized during the search. The appellant also provided confirmations from the sellers, along with relevant supporting documents, showing that no payment had been made to any of the parties on or before 1st June 1995 or even till the date of search. The Tribunal found that the appellant had filed confirmations from all parties involved and that the purchase of shares at Rs. 10 per share was recorded in the account books before the date of search. The Tribunal also noted that no evidence was found during the search, nor did the AO bring any evidence to prove that the appellant made the payment of Rs. 18,17,410. The Tribunal concluded that the addition of Rs. 18,17,410 as undisclosed income could not be sustained and deleted the same. This ground of appeal was allowed.

Conclusion:

In conclusion, the Tribunal partly allowed the appeal regarding the addition of Rs. 1,55,669, directing the AO to re-examine the sources of bank deposits. The Tribunal fully allowed the appeal regarding the addition of Rs. 18,17,410, deleting the addition as the AO failed to provide conclusive evidence of the alleged undisclosed income.

 

 

 

 

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