2008 (1) TMI 460 - AT - Income Tax

Summary

Issues Involved:
1. Sustained addition of Rs. 71,000.
2. Addition of Rs. 55,364 on account of unexplained investment in the well (Kuwa).
3. Charging of interest under sections 234A and 234B.
4. Addition of Rs. 1,00,000 on account of unexplained investment in the construction of a building.

Issue-wise Detailed Analysis:

1. Sustained Addition of Rs. 71,000:
The assessee, a carpenter with agricultural income, was subject to a survey under section 133A, revealing investments of Rs. 71,000 and Rs. 55,364. The assessee contested the Rs. 71,000 investment, claiming it was made by him and his wife through loans, supported by affidavits and statements from lenders. The AO and CIT(A) upheld the addition, doubting the new evidence. However, the Tribunal noted the lack of clarity on who recorded the initial statements and the AO's inconsistency in accepting these statements. The Tribunal found the assessee had sufficiently proven the source of the investment through affidavits and witnesses, thus deleting the addition of Rs. 71,000.

2. Addition of Rs. 55,364 on Account of Unexplained Investment in the Well (Kuwa):
The AO added Rs. 55,364 based on the assessee's statement that the amount was spent from unrecorded income. The CIT(A) upheld this, referencing a previous Tribunal order suggesting the amount "could be" considered in the assessee's hands. The Tribunal found the explanation that the amount was recorded in the father's books of accounts credible, noting the AO's reliance solely on the assessee's admission. The Tribunal concluded that the addition was baseless and deleted it.

3. Charging of Interest under Sections 234A and 234B:
The Tribunal acknowledged that charging interest under sections 234A and 234B is mandatory but allowed consequential relief to the assessee.

4. Addition of Rs. 1,00,000 on Account of Unexplained Investment in Construction:
The AO added Rs. 1,00,000 based on the assessee's statement about a Rs. 2,00,000 investment in construction during the financial year 1992-93. The assessee provided evidence that construction permission was only granted in September 1994, making prior construction impossible. The Tribunal found no evidence to contradict the assessee's claim and noted the AO's partial acceptance of the statement's inaccuracy. Consequently, the Tribunal deleted the addition of Rs. 1,00,000.

Conclusion:
The Tribunal partly allowed the appeal for the assessment year 1992-93, deleting the additions of Rs. 71,000 and Rs. 55,364 and allowing consequential relief for interest under sections 234A and 234B. The appeal for the assessment year 1993-94 was fully allowed, deleting the addition of Rs. 1,00,000.