2002 (5) TMI 209 - AT - Income Tax

Summary

Issues Involved:
1. Addition of undisclosed cash found during the search.
2. Addition of unexplained investment in properties.
3. Addition of unexplained investment in household items.
4. Addition of discrepancy in loose papers.
5. Addition of gifts received from various parties.
6. Addition of unexplained investment in jewelry.

Detailed Analysis:

1. Addition of Undisclosed Cash Found During the Search:
The first ground of appeal concerns the addition of undisclosed cash amounting to Rs. 5,69,000 found during the search. The Assessing Officer added the entire amount as unexplained cash. The Tribunal, however, noted that Rs. 77,200 was found at the residential premises of the appellant, out of which Rs. 17,400 belonged to the daughter of the assessee. The Tribunal presumed that another Rs. 20,000 could be kept for emergencies, thus treating Rs. 40,000 as unexplained income. Regarding the cash found at West Punjabi Bagh, the Tribunal observed that the appellant did not reside there and the cash could belong to the son of the appellant or other family concerns. Consequently, the Tribunal allowed relief of Rs. 5,29,000. However, there was a difference of opinion among the members, leading to the matter being referred to a Third Member. The Third Member concurred with the view that the cash found at West Punjabi Bagh should not be added to the appellant's income, thus reducing the addition by Rs. 5,29,000.

2. Addition of Unexplained Investment in Properties:
The next ground of appeal involved an addition of Rs. 39,62,000 under the head of unexplained investment in properties, based on a letter written by the appellant's son detailing investments in immovable properties. The appellant had declared Rs. 30 lakhs as undisclosed income in the return. The Tribunal observed that the Assessing Officer had no other material except the letter and concluded that the addition of Rs. 39,62,000 was unjustified. The Tribunal restricted the addition to Rs. 30 lakhs, aligning with the appellant's declaration.

3. Addition of Unexplained Investment in Household Items:
The appellant contested the addition of Rs. 1 lakh on account of unexplained investment in household items. The Tribunal noted that the appellant had surrendered Rs. 1 lakh as unexplained investment during the search and confirmed this surrender through a letter. Despite the appellant's subsequent explanation that the items belonged to group companies, the Tribunal found that the appellant failed to reconcile the items with the balance sheets of the companies. Thus, the Tribunal upheld the addition of Rs. 1 lakh as reasonable and justified.

4. Addition of Discrepancy in Loose Papers:
The appellant had returned Rs. 50,000 as part of unexplained investment, which was included in the block assessment period return. The Tribunal upheld this addition, as it was already acknowledged by the appellant.

5. Addition of Gifts Received from Various Parties:
The appellant challenged the addition of Rs. 9,90,000 representing gifts received from various parties. The Tribunal referred to its earlier decision in the case of R.P. Monga & Sons, where it was held that the gifts were disclosed in regular income-tax and wealth-tax assessments. The Tribunal concluded that the gifts were outside the definition of "undisclosed income" under Chapter XIVB of the Income-tax Act, and thus, the addition was deleted.

6. Addition of Unexplained Investment in Jewelry:
The final ground of appeal concerned the addition of Rs. 8,25,000 for unexplained investment in jewelry. The appellant had surrendered Rs. 20 lakhs as unexplained investment in jewelry during the search, but only Rs. 11,75,000 was disclosed in the hands of the appellant's family members. The Tribunal observed that the jewelry belonged to the appellant's wife and daughter-in-law, who were independently assessed to tax. The Tribunal concluded that any discrepancy should be explained by them and not by the appellant. Consequently, the addition was deleted. However, there was a difference of opinion among the members, leading to the matter being referred to a Third Member. The Third Member concurred with the view that the addition should not be made in the appellant's hands, thus deleting the addition of Rs. 8,25,000.

Conclusion:
The appeal filed by the assessee was partly allowed, with significant reductions in the additions made by the Assessing Officer. The Tribunal's final decision resulted in the deletion of Rs. 5,29,000 from the undisclosed cash addition, restriction of the unexplained investment in properties to Rs. 30 lakhs, confirmation of Rs. 1 lakh for unexplained household items, confirmation of Rs. 50,000 for discrepancy in loose papers, deletion of Rs. 9,90,000 for gifts received, and deletion of Rs. 8,25,000 for unexplained investment in jewelry.