2003 (12) TMI 313 - AT - Income Tax

Summary

Issues:
1. Addition on account of investment in household goods
2. Addition on account of foreign exchange

Analysis:

Issue 1: Addition on account of investment in household goods
The appeal was filed against the order of the CIT(A) maintaining the addition on account of investment in household goods. The assessee had surrendered undisclosed income on account of unexplained investment in furniture and fixtures during a search. The AO added the difference amount to the undisclosed income returned by the assessee. The Tribunal noted that block assessment proceedings are meant for assessing undisclosed income based on material found during the search. It was emphasized that the AO cannot make additions without evidence found during the search. The Tribunal referred to judicial pronouncements to support its decision. It held that the addition made by the AO was outside the purview of block assessment, and the CIT(A) was not justified in confirming it. The Tribunal directed the AO to delete the said addition.

Issue 2: Addition on account of foreign exchange
The addition on account of foreign exchange found during the search was also challenged. The foreign exchange was explained as being purchased for foreign tours undertaken by the assessee. The AO treated the foreign exchange as undisclosed income since the balance was not returned to the concerned companies. The CIT(A) upheld the AO's decision, stating that the amount was not justified to be kept by the assessee. The Tribunal observed that the explanation provided by the assessee lacked evidence supporting it. It noted that there was no evidence showing the foreign exchange was held on behalf of any company. As the amount withdrawn by the companies for foreign exchange was claimed as expenditure, the AO's decision to treat the foreign exchange as unexplained income was upheld. The Tribunal dismissed the appeal on this ground.

In conclusion, the Tribunal partly allowed the appeal, directing the deletion of the addition on account of investment in household goods while upholding the addition on account of foreign exchange.