2003 (1) TMI 262 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 36,46,545 on account of unexplained cash.
2. Addition of Rs. 1,00,33,970 on account of 19 slips found.
3. Addition of Rs. 2,09,841 on account of unexplained stock.

Summary:

1. Addition of Rs. 36,46,545 on account of unexplained cash:
The assessee admitted that the cash found at B-11/3, Jhilmil, Shahdara was not recorded in the regular books of account. The assessee argued that the cash represented current income and should not be considered undisclosed income u/s 158B(b) and Explanation 5 to section 271(1)(c). However, the Tribunal held that Chapter XIVB, which contains special provisions for assessing undisclosed income, overrides general provisions. The Tribunal found that the cash was not recorded in the regular books and was kept at a different location, indicating it would not have been disclosed. Thus, the addition of Rs. 36,46,545 was upheld as undisclosed income.

2. Addition of Rs. 1,00,33,970 on account of 19 slips found:
The Tribunal examined the 19 slips found with the cash. The assessee argued that these slips were dumb documents and not in their possession. The Tribunal, however, noted that the slips were found in the same almirah as the unaccounted cash and stock, indicating they belonged to the assessee. The Tribunal drew an adverse inference that these slips related to unaccounted business transactions. The Tribunal deleted the ad hoc addition of Rs. 2 lakhs for slips without amounts but upheld the addition based on slip No. 15 and other slips, restricting the addition to Rs. 69,373 after setting off against the unexplained cash addition.

3. Addition of Rs. 2,09,841 on account of unexplained stock:
The Tribunal found that the stock of grease, furnace oil, and copper scrap found at the premises was not properly explained by the assessee. The Tribunal noted discrepancies in the quantification of furnace oil and the rate applied for copper scrap. The Tribunal directed the Assessing Officer to verify whether the scrap was accounted for in the regular books and to allow the assessee an opportunity to explain the stock. The addition for zinc was restricted to the gross profit on account of shortage. The matter was remanded to the Assessing Officer for fresh adjudication.

Conclusion:
The appeal was partly allowed, with the Tribunal upholding the addition of Rs. 36,46,545 for unexplained cash, modifying the addition for slips to Rs. 69,373, and remanding the issue of unexplained stock for fresh adjudication.