1990 (1) TMI 132 - AT - Income Tax

Issues Involved:
1. Addition of Rs. 1,35,930 for unexplained investment in silver ornaments.
2. Addition of Rs. 4,14,215 for unexplained investment in gold ornaments.
3. Addition of Rs. 5,000 for low withdrawals.
4. Addition of Rs. 15,000 for discrepancies in purchase bills.
5. Charging of interest under Section 217 and Section 139(8).
6. Re-opening of assessment under Section 143(3).
7. Right of cross-examination.

Detailed Analysis:

1. Addition of Rs. 1,35,930 for Unexplained Investment in Silver Ornaments
The appellant contested the addition of Rs. 1,35,930 for unexplained investment in silver ornaments weighing 46.300 kgs. The search conducted by the Income-tax Department revealed these ornaments, which were allegedly concealed behind wooden panels. The department rejected the appellant's claim that these ornaments were received on approval from M/s Lodhi Lal Radha Govind (LLRG). The department argued that LLRG did not have sufficient stock to supply the ornaments, and the confirmation from LLRG was deemed as an accommodation due to the close relationship between the parties. The CIT(A) supported the department's view, emphasizing the concealment and the timing of the search.

The appellant argued that the ornaments were indeed received from LLRG, supported by a voucher and entries in LLRG's books of accounts. The appellant also provided evidence of fluctuating silver prices to counter the department's stock calculations. The Tribunal found the appellant's evidence credible, noting that similar transactions with Navin Abhushan Bhandar were accepted by the department. The Tribunal concluded that the addition was based on suspicion and directed its deletion.

2. Addition of Rs. 4,14,215 for Unexplained Investment in Gold Ornaments
The appellant challenged the addition of Rs. 4,14,215 for unexplained investment in gold ornaments, which included items allegedly belonging to LLRG, returned from Nav Ratanmal Soni, and impurities in the form of copper in bangles.

(i) M/s Lodhilal Radha Govind: 0.663.25 kg.
The Tribunal found that the gold ornaments weighing 663.25 gms were received from LLRG, supported by a voucher and entries in LLRG's gold control register. The Tribunal noted that the department's rejection was based on suspicion and conjecture, and directed the deletion of this addition.

(ii) Nav Ratanmal Soni: 910.300 gms.
The appellant explained that these ornaments were received from a goldsmith for remaking old designs. The Tribunal found sufficient evidence in the form of statements and entries in gold control registers, supporting the appellant's claim. The addition was directed to be deleted.

(iii) 26 Gold Bangles: 997 gms.
The appellant claimed that these bangles contained only 78 gms of gold, with the rest being copper. The Tribunal found the department's rejection of this claim to be based on suspicion. The matter was remanded to the ITO for fresh examination, with directions to consider all evidence and provide a reasonable opportunity for the appellant to explain.

3. Addition of Rs. 5,000 for Low Withdrawals
The Tribunal agreed with the lower authorities that the appellant's withdrawals of Rs. 2,800 for personal expenses were too low, given the extent of his business. The addition of Rs. 5,000 was confirmed as reasonable.

4. Addition of Rs. 15,000 for Discrepancies in Purchase Bills
The appellant contested the addition of Rs. 15,000 based on discrepancies in purchase bills found during the search. The Tribunal found that the lower authorities were justified in making this addition, given the evidence of under-billing and discrepancies in the rough papers and actual bills.

5. Charging of Interest under Section 217 and Section 139(8)
The Tribunal held that the mention of Section 215 instead of Section 217 was not a fatal error. The appellant's remedy for contesting the interest charges lay with the ITO, IAC, or CIT, not in appeal. This applied similarly to interest under Section 139(8).

6. Re-opening of Assessment under Section 143(3)
The Tribunal found no basis for the appellant's objection to the re-opening of the assessment under Section 143(3), stating that the assessment could be re-opened according to the provisions of law.

7. Right of Cross-examination
The Tribunal opined that the right of cross-examination is available for witnesses brought by the opposing party. Since no witness was relied upon by the department for adverse findings, the appellant's objection was rejected. However, the Tribunal directed that in the remanded matter, any new evidence or witness should be disclosed to the appellant, allowing for cross-examination.

Conclusion
The Tribunal allowed the appeal partly, directing the deletion of additions for unexplained investments in silver and certain gold ornaments, while remanding the issue of gold bangles for fresh examination. Additions for low withdrawals and discrepancies in purchase bills were confirmed, and objections regarding interest charges and re-opening of assessment were rejected.

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