2004 (2) TMI 288 - AT - Income Tax

Summary

Issues Involved:
1. Validity of Notice under Section 158BC
2. Validity of Assessment Order
3. Addition of Rs. 5 Lakhs for Payment to Jewellers
4. Addition of Rs. 4,91,000 for Donation
5. Addition of Rs. 4,27,201 for Foreign Exchange
6. Addition of Rs. 4,07,438 for Jewellery
7. Addition of Rs. 20,000 for Silver Utensils

Detailed Analysis:

1. Validity of Notice under Section 158BC:
The appellant challenged the jurisdiction of the AO due to the notice under Section 158BC not mentioning the appellant's status. The appellant argued that the notice was illegal, citing various case laws. However, the tribunal held that the notice was presumed to be addressed to the individual, and the appellant had complied with it by filing a return. Thus, the AO had correctly assumed jurisdiction, and the additional ground of appeal was not admitted.

2. Validity of Assessment Order:
The appellant contended that the CIT's approval of the assessment order was merely procedural and thus void. The tribunal found that the correspondence between the AO and CIT was procedural and did not require a hearing for the assessee before approval. Therefore, the ground of appeal was dismissed.

3. Addition of Rs. 5 Lakhs for Payment to Jewellers:
During a search, a promissory note for Rs. 5 lakhs was found. The appellant claimed it was an advance for a diamond set, covered by surrendered cash and jewelry. The AO found contradictory statements from the jewellers and treated the amount as undisclosed income. The tribunal, however, agreed that since Rs. 7 lakhs in cash was surrendered, the promissory note amount was covered, and no separate addition was warranted. The addition was deleted.

4. Addition of Rs. 4,91,000 for Donation:
Receipts for donations totaling Rs. 4,91,000 were found. The appellant claimed these were from the sale of movable property per his father's will. The AO disbelieved this, treating it as undisclosed income. The tribunal noted the will was neither registered nor on stamp paper, and no witnesses were produced. The delay in selling the assets further questioned the will's authenticity. Thus, the addition was upheld.

5. Addition of Rs. 4,27,201 for Foreign Exchange:
Foreign currency worth Rs. 4,27,201 was found. The appellant claimed it was unspent currency from business trips, supported by employer certificates. The tribunal found that the foreign currencies were surrendered to banks and reconciled with the seized amounts. Since the employer confirmed the issuance for business purposes, the addition was deleted.

6. Addition of Rs. 4,07,438 for Jewellery:
Jewellery worth Rs. 5,88,867 was found, with Rs. 1,81,427 explained. The appellant had surrendered Rs. 3 lakhs for undisclosed jewellery, leaving Rs. 1,07,438 disputed. The tribunal considered the surrendered amount from on-money received on a flat sale, which covered the disputed amount. Thus, the addition was deleted.

7. Addition of Rs. 20,000 for Silver Utensils:
The tribunal similarly considered the surrendered amount from on-money received on a flat sale to cover the investment in silver utensils. Thus, the addition was deleted.

Conclusion:
The appeal was partly allowed, with the tribunal deleting the additions for the promissory note, foreign exchange, jewellery, and silver utensils while upholding the addition for the donation.