2004 (9) TMI 332 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 2 lakhs as income from undisclosed sources.
2. Explanation of cash found during the search.
3. Set-off of 'on money' collected by M/s. Vaishali Enterprises.
4. Compliance with directions from CIT(A) and ITAT.
5. Binding nature of judicial orders on the Assessing Officer.

Detailed Analysis:

1. Addition of Rs. 2 lakhs as income from undisclosed sources:
The assessee was aggrieved by the addition of Rs. 2 lakhs out of the cash found and seized during a search operation, which was treated as income from undisclosed sources. The Assessing Officer did not accept the explanation provided by the assessee regarding the source of the cash, leading to the addition.

2. Explanation of cash found during the search:
During the search on 9-1-1986, Rs. 2,56,689 was found in cash. The assessee claimed that Rs. 47,294 belonged to his wife and Rs. 2 lakhs belonged to M/s. Vaishali Enterprises. The Assessing Officer, however, did not accept this explanation and treated the Rs. 2 lakhs as undisclosed income.

3. Set-off of 'on money' collected by M/s. Vaishali Enterprises:
The assessee contended that Rs. 1 lakh out of the Rs. 2 lakhs found was part of the 'on money' collected by M/s. Vaishali Enterprises in the preceding years, which amounted to Rs. 1,22,659. The Tribunal had previously directed the Assessing Officer to verify if these additions had become final and to allow set-off if they had. However, the Assessing Officer did not allow this set-off, leading to the dispute.

4. Compliance with directions from CIT(A) and ITAT:
The CIT(A) had remanded the case back to the Assessing Officer with specific directions to re-examine the case and give a fresh finding. The Tribunal also directed the Assessing Officer to verify the finality of the additions of 'on money' and to allow set-off accordingly. The assessee argued that these directions were not properly followed by the Assessing Officer.

5. Binding nature of judicial orders on the Assessing Officer:
The Judicial Member emphasized that the Assessing Officer was bound by the directions of the CIT(A) and the Tribunal. The failure to follow these directions was against judicial discipline and hierarchy. The Judicial Member cited several judgments to support the view that lower authorities must comply with the orders of higher judicial bodies.

Separate Judgments Delivered:

Accountant Member's Judgment:
The Accountant Member did not find any error in the order of the CIT(A) and upheld the addition of Rs. 2 lakhs as undisclosed income. He noted contradictions in the assessee's statements and emphasized the lack of a direct claim or confirmation from M/s. Vaishali Enterprises regarding the cash found. He concluded that the amount remained unexplained and justified the addition.

Judicial Member's Judgment:
The Judicial Member disagreed with the Accountant Member and emphasized the binding nature of the CIT(A)'s and Tribunal's directions. He argued that the Assessing Officer was duty-bound to follow these directions and allow the set-off of Rs. 1 lakh from the 'on money' collected by M/s. Vaishali Enterprises. He cited various judgments to support his view that the Assessing Officer should not have distinguished the directions on untenable grounds.

Third Member's Judgment:
The Third Member, President Vimal Gandhi, concurred with the Judicial Member. He noted that the assessee had established a prima facie case and that the revenue had not brought any material to controvert the claim. He emphasized the need for judicial discipline and hierarchy, concluding that Rs. 1 lakh out of the cash found should be treated as explained and deleted the addition of Rs. 1 lakh as income from undisclosed sources.

Final Decision:
In accordance with the majority view, the appeal of the assessee was partly allowed, and the addition of Rs. 1 lakh was deleted.