2007 (1) TMI 226 - AT - Income Tax

Summary

Issues Involved:
1. Acceptance of money-lending business in the status of HUF since 1981.
2. Allowance of opening capital of Rs. 47.50 lakhs on 1st April, 1997.
3. Credit of opening capital of Rs. 51.30 lakhs instead of Rs. 47.50 lakhs.
4. Deletion of addition on account of gold ornaments found in excess of the quantity prescribed by the CBDT.

Issue-Wise Detailed Analysis:

1. Acceptance of Money-Lending Business in the Status of HUF Since 1981:
The Revenue contended that the CIT(A) erred in accepting the money-lending business in the status of HUF since 1981, as it was not evident and was neither disclosed nor supported by evidence found during the search or assessment proceedings. The Tribunal upheld the CIT(A)'s decision, noting that the partition deeds of 1981 and 1995 found during the search supported the existence of HUF. The Tribunal dismissed the Revenue's argument, stating, "the learned CIT(A) was justified in directing the AO that the undisclosed income is required to be taxed in the hands of the HUF and not in the individual status."

2. Allowance of Opening Capital of Rs. 47.50 Lakhs on 1st April, 1997:
The Tribunal agreed with the CIT(A) in allowing the opening capital of Rs. 47.50 lakhs, as the family settlement deed dated 29th March, 1995, found during the search, clearly mentioned this amount to be divided among Shri Gopi Lal Mor and his three sons. The Tribunal emphasized, "Once the availability of cash to the tune of Rs. 47,50,000 is accepted, its utilization is also to be accepted as stated by the assessee unless it is proved that this amount was utilized elsewhere."

3. Credit of Opening Capital of Rs. 51.30 Lakhs Instead of Rs. 47.50 Lakhs:
The assessee argued that the CIT(A) should have allowed credit of Rs. 51.30 lakhs instead of Rs. 47.50 lakhs, considering the interest earned on the capital. The Tribunal dismissed this claim, stating, "there is absolutely no material on record to show that this money was lent by the assessee after 29th March, 1995." The Tribunal upheld the CIT(A)'s decision to allow credit of Rs. 47.50 lakhs.

4. Deletion of Addition on Account of Gold Ornaments Found in Excess of the Quantity Prescribed by the CBDT:
The Revenue contested the deletion of the addition for gold ornaments found in excess of the CBDT's prescribed quantity. The Tribunal referred to the CBDT Instruction dated 11th May, 1994, which provides guidelines for the non-seizure of gold jewellery up to certain limits. The Tribunal noted that the possession of gold jewellery by the family was reasonable and could not be held unexplained. The Tribunal stated, "When this instruction is applied to the facts of the case, we observe that the possession of gold jewellery of 733.930 gms by the family of four persons cannot be held to be unexplained."

Conclusion:
The Tribunal dismissed both the Revenue's appeals and the assessees' cross-objections on all grounds, upholding the CIT(A)'s decisions regarding the acceptance of HUF status for money-lending business, allowance of opening capital of Rs. 47.50 lakhs, and deletion of the addition for gold ornaments within the prescribed limits.