1997 (5) TMI 91 - AT - Income Tax

Issues Involved:
1. Deletion of unexplained expenditure of Rs. 67,216.
2. Acknowledgment of Rs. 50,000 received by Shri Haji Abdul Rahim for providing a false affidavit.

Detailed Analysis:

Issue 1: Deletion of Unexplained Expenditure of Rs. 67,216
The assessee filed a return of income for the assessment year 1985-86, admitting a loss of Rs. 70,829. The assessee claimed a credit entry of Rs. 1,27,48,325 as a gift in his capital account, which included a cash gift of Rs. 1.25 crores from Haji Abdul Rahim and 3225 shares of M/s. Shaw Wallace & Co. valued at Rs. 2,48,325 from V.K. Chandrakumar. The Assessing Officer (AO) found these gifts to be non-genuine after conducting inquiries. The assessee subsequently filed a revised return including Rs. 2,78,081 as income for the shares initially claimed as a gift. The AO concluded that the gift from Haji Abdul Rahim was fictitious, based on several discrepancies and the statement of Haji Abdul Rahim, who confessed to providing a false affidavit in exchange for Rs. 50,000. The AO added Rs. 50,000 to the assessee's income as unexplained expenditure.

Issue 2: Acknowledgment of Rs. 50,000 Received by Shri Haji Abdul Rahim for Providing a False Affidavit
The CIT(Appeals) directed the deletion of the unexplained expenditure of Rs. 67,216, including Rs. 50,000 allegedly paid to Haji Abdul Rahim. The CIT(Appeals) held that the mere statement of Haji Abdul Rahim, without corroborative evidence, could not establish that the assessee paid Rs. 50,000 for the false affidavit. The Departmental Representative argued that circumstantial evidence strongly indicated that the assessee must have paid some amount to Haji Abdul Rahim for the false affidavit. The assessee's counsel contended that the assessee voluntarily offered the income of Rs. 1.25 crores and would have declared the Rs. 50,000 if it had been paid.

The Tribunal considered the rival submissions and material on record. The Tribunal found that the assessee initially claimed the gift of Rs. 1.25 crores and shares of M/s. Shaw Wallace & Co. as gifts but later revised the returns to include these amounts as income after the AO's inquiries. The Tribunal concluded that the assessee obtained a false affidavit from Haji Abdul Rahim to defraud the revenue. The Tribunal rejected the assessee's counsel's argument, noting that the assessee would not have declared the Rs. 50,000 if the AO had not made inquiries. The Tribunal held that the assessee must have paid Rs. 50,000 to Haji Abdul Rahim to obtain the false affidavit, as there was no reason for Haji Abdul Rahim to sign a false affidavit without consideration.

The Tribunal reversed the CIT(Appeals)' decision and confirmed the AO's addition of Rs. 50,000 to the assessee's income. The Tribunal emphasized that the facts and circumstances compelled them to believe Haji Abdul Rahim's statement and that the assessee's actions were aimed at defrauding the revenue.

Conclusion:
The Tribunal allowed the Revenue's appeal, confirming the addition of Rs. 50,000 to the assessee's income as unexplained expenditure and reversing the CIT(Appeals)' order. The Tribunal found that the assessee's actions were intended to defraud the revenue by obtaining a false affidavit from Haji Abdul Rahim, who was paid Rs. 50,000 for this purpose.

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