2005 (1) TMI 360 - AT - Income Tax

Summary

Issues:
Appeal against CIT(A) order sustaining addition for undisclosed investments in promissory note.

Analysis:
The appeal was against the order of the CIT(A) regarding the addition of Rs. 1,00,000 on account of undisclosed investments in a promissory note during the block period from 1st April, 1988 to 9th Dec, 1998. The assessee, an 80-year-old individual, explained that the blank promissory notes found during a search were mere proposals and not evidence of actual investment. The AO, however, determined the undisclosed income at Rs. 1 lakh based on these promissory notes. The CIT(A) upheld the addition, stating that the transaction was completed based on the seized documents. The assessee contended that the seized documents did not bear their name and were incomplete, supported by an affidavit from a director of the company mentioned in the promissory notes.

The counsel for the assessee argued that the burden to show the investment lies with the Revenue, and in this case, the seized documents were incomplete and did not prove any investment by the assessee. The counsel referenced a similar case from the Tribunal, Nagpur Bench, where it was held that blank promissory notes are not conclusive evidence of investment. The counsel further highlighted that the practice of issuing blank promissory notes was common and that the addition made by the AO was unjustified. The Departmental Representative, however, argued that the seized documents were sufficient evidence of the advance made by the assessee.

After considering the submissions and evidence, the Tribunal found that the affidavit provided by the director of the company mentioned in the promissory notes was a legal and cogent piece of evidence. The Tribunal relied on a previous decision by the same Bench, which held that blank promissory notes are not conclusive evidence of investment. It was concluded that the promissory notes were incomplete documents and mere proposals, thus the addition made by the AO under section 69 of the IT Act was unsustainable. Consequently, the appeal of the assessee was allowed, and the addition was directed to be deleted.