2001 (9) TMI 262 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of treating Rs. 2.56 crores as undisclosed income.
2. Non-allowance of the claim of bad debts amounting to Rs. 29,10,778.
3. Deletion of Rs. 21.70 lakhs from the undisclosed income.

Summary:

1. Confirmation of treating Rs. 2.56 crores as undisclosed income:
The assessee's appeal was primarily against the confirmation of Rs. 2.56 crores as undisclosed income. The Assessing Officer (AO) had noted that the assessee had invested in fictitious names deposits worth Rs. 2.83 crores. The CIT(A) confirmed this addition, observing that the appellant failed to provide satisfactory evidence to support the claim that the funds originated from the sale of cloth taken on loan from Mr. Ramamurthy and Mr. Thangavelu and sold at Erode Shandy. The Tribunal found that the explanation provided by the assessee was not substantiated by any verifiable evidence. However, it was also noted that the fixed deposits were discovered through investigations following the search, not during the search itself. Citing legal precedents, the Tribunal concluded that the amount of Rs. 2.56 crores could not be included in the undisclosed income of the block period as per Chapter XIV-B of the Act.

2. Non-allowance of the claim of bad debts amounting to Rs. 29,10,778:
The claim of bad debts amounting to Rs. 29,10,778 was rejected by the authorities below and upheld by the Tribunal. The Tribunal noted that Chapter XIV-B is a special provision for the assessment of undisclosed income found as a result of a search and does not cover items that could be considered under regular assessments. Hence, the claim for bad debts was rightly rejected.

3. Deletion of Rs. 21.70 lakhs from the undisclosed income:
The Department's appeal was against the deletion of Rs. 21.70 lakhs from the undisclosed income. However, the Department filed a letter from the Deputy Commissioner of Income-tax, Central Circle II Coimbatore, requesting the withdrawal of the appeal on this issue. The Tribunal granted this request, and the appeal filed by the Department was treated as dismissed.

Conclusion:
The assessee's appeal was allowed in part, specifically regarding the exclusion of Rs. 2.56 crores from the undisclosed income of the block period. The claim of bad debts was rejected, and the Department's appeal concerning the deletion of Rs. 21.70 lakhs was dismissed.