2002 (5) TMI 218 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 51,92,750 u/s 68 of the Income-tax Act, 1961.
2. Aggregation of agricultural income of Rs. 3,75,000 for rate purposes.

Issue 1: Addition of Rs. 51,92,750 u/s 68 of the Income-tax Act, 1961

The assessee challenged the addition of Rs. 51,92,750 as unexplained credit u/s 68, arguing that the sale proceeds of diamonds were genuine transactions with identified purchasers. The Assessing Officer (AO) disbelieved the transactions citing discrepancies in the sale location, the method of diamond removal, and the payment process. The AO also relied on credit card statements and bank account entries to assert that the assessee was not present at Surat on the sale dates.

The Tribunal found that the identity, genuineness, and creditworthiness of Shukra Jewellers were established. The diamonds were declared under the VDIS 1997, and the sale of gold was accepted by the Department. The Tribunal held that the AO's reliance on credit card statements and bank entries collected behind the assessee's back was not permissible, citing Kishinchand Chellaram v. CIT. The Tribunal also noted that the AO failed to provide evidence that the assessee was not at Surat on the sale dates. The Tribunal concluded that the addition was based on presumptions and suspicion, and thus, deleted the addition of Rs. 51,92,750.

Issue 2: Aggregation of Agricultural Income of Rs. 3,75,000 for Rate Purposes

The assessee contested the aggregation of agricultural income from M/s. Basanth Farms for rate purposes, arguing that neither the Income-tax Act nor the Rules provide for such aggregation. The Tribunal referred to the decision in Asstt. CIT v. Smt. Chandri N. Shah, which held that agricultural share income from a partnership firm cannot be aggregated for rate purposes. Consequently, the Tribunal directed that the agricultural share income of Rs. 3,75,000 should not be aggregated for rate purposes.

Conclusion:

The Tribunal allowed the appeal, deleting the addition of Rs. 51,92,750 u/s 68 and directing that the agricultural income of Rs. 3,75,000 should not be aggregated for rate purposes.