2003 (7) TMI 301 - AT - Income Tax

Summary

Issues Involved:
1. Non-receipt of notice under section 158BC.
2. Assessment barred by time.
3. Audit report furnished beyond the time limit under section 142(2A).
4. Non-allowance of commission and local tour expenses.
5. Addition due to inadequate personal drawings.
6. Addition due to unexplained bank deposits.
7. Treatment of cash and bank balances found during the search.
8. Deletion of interest on loan taken from State Bank of India.
9. Deletion of addition due to unexplained peak investment.
10. Deletion of disallowance of bad debts.

Detailed Analysis:

1. Non-receipt of Notice Under Section 158BC:
The assessee claimed not to have received the notice under section 158BC for filing the return. The Revenue provided copies of the notice and reminders. The Tribunal found that reminders could be treated as notice and rejected the plea that there was no notice.

2. Assessment Barred by Time:
The assessee argued that the assessment was barred by time, claiming the last search was on 12-12-1997, giving the Assessing Officer two years until 31-12-1999. The Tribunal noted the audit direction received on 4-12-1999 and the audit report received on 5-6-2000. The Tribunal concluded that the assessment completed on 31-7-2000 was within time, considering the exclusion of 180 days for the audit report and an additional 60 days as per section 158BE.

3. Audit Report Furnished Beyond Time Limit:
The assessee contended that the audit report was received late, making the assessment invalid. The Tribunal held that the delay in receiving the audit report was attributable to the assessee and not the Assessing Officer, thus rejecting the plea.

4. Non-allowance of Commission and Local Tour Expenses:
The Assessing Officer disallowed 50% of commission expenses due to lack of bills or vouchers, later restricting it to 25%. The Tribunal upheld the disallowance as the assessee could not substantiate the claim.

5. Addition Due to Inadequate Personal Drawings:
The CIT(A) justified the addition considering the educational expenses of the assessee's children. The Tribunal upheld the addition as the assessee failed to provide evidence to counter the claim.

6. Addition Due to Unexplained Bank Deposits:
The CIT(A) confirmed the addition of Rs. 1,50,000 as the assessee could not provide a satisfactory explanation. The Tribunal upheld the CIT(A)'s order.

7. Treatment of Cash and Bank Balances Found During Search:
The assessee argued for telescoping the addition made on account of unexplained sources of income. The Tribunal agreed and directed the Assessing Officer to give credit for the addition made on account of unexplained sources.

8. Deletion of Interest on Loan Taken from State Bank of India:
The CIT(A) allowed the interest paid on loans as it was for business purposes and paid during the year. The Tribunal upheld this deletion as the facts were not contested by the Revenue.

9. Deletion of Addition Due to Unexplained Peak Investment:
The CIT(A) deleted the addition after verifying the details of money lending business and cash flow statements. The Tribunal upheld the deletion as the Revenue could not contest the facts found by the CIT(A).

10. Deletion of Disallowance of Bad Debts:
The CIT(A) allowed the bad debts claim of Rs. 7.60 lakhs, considering the amendment in section 36(1)(vii). The Tribunal upheld the deletion as the Revenue could not provide evidence that the debts had not become bad.

Conclusion:
The appeal by the assessee was allowed in part, while the appeal by the Department was dismissed.