2004 (10) TMI 316 - AT - Income Tax

Issues Involved:
1. Correctness of the first appellate authority's order.
2. Treatment of investments in Visakha Precious Stones as undisclosed investments.
3. Treatment of third-party investments as the appellant's undisclosed investments.
4. Genuineness of loan transactions.
5. Addition of Rs. 36,07,720 as investment in Visakha Precious Stones.
6. Limitation of additions to Rs. 18,69,000 as declared under s. 132(4).
7. Tax exemption on income from Liquor Syndicate.
8. Addition of Rs. 2 lakhs as share of income from Liquor Syndicate.
9. Levy of surcharge.

Detailed Analysis:

1. Correctness of the first appellate authority's order:
The appellant challenged the correctness of the CIT(A)'s order dated 13th September 2002, which upheld the block assessment made by the AO under section 158BC for the block period from 1st April 1989 to 21st December 1999.

2. Treatment of investments in Visakha Precious Stones as undisclosed investments:
The appellant argued that the investments in Visakha Precious Stones were supported by evidence and should not be treated as undisclosed. The AO, however, considered these investments as undisclosed based on the statement recorded on 10th February 2000, which the appellant claimed was made under coercion.

3. Treatment of third-party investments as the appellant's undisclosed investments:
The appellant contended that the investments made by third parties were wrongly treated as the appellant's undisclosed investments. The CIT(A) and AO relied on the appellant's statement but did not consider the confirmations from various parties who made the investments.

4. Genuineness of loan transactions:
The appellant offered to produce all creditors to support the genuineness of the loan transactions. The AO ignored this offer and relied solely on the appellant's statement made under alleged pressure.

5. Addition of Rs. 36,07,720 as investment in Visakha Precious Stones:
The AO added Rs. 36,07,720 as undisclosed income, which was upheld by the CIT(A). The Tribunal found that the statement recorded on 10th February 2000, after the conclusion of the search, could not be considered under section 132(4). The Tribunal noted that the investments were disclosed in the books of Visakha Precious Stones, a regular assessee, and thus could not be treated as undisclosed income.

6. Limitation of additions to Rs. 18,69,000 as declared under s. 132(4):
The appellant argued that the additions should be limited to Rs. 18,69,000 declared under section 132(4). The Tribunal found that the appellant's statement was obtained under coercion and that the investments were already disclosed in the company's books.

7. Tax exemption on income from Liquor Syndicate:
The appellant claimed that the income from the Liquor Syndicate was exempt from tax. The AO added Rs. 5 lakhs as undisclosed income, which the CIT(A) reduced to Rs. 2 lakhs. The Tribunal allowed a set-off of Rs. 1 lakh against the returned income.

8. Addition of Rs. 2 lakhs as share of income from Liquor Syndicate:
The Tribunal found that the income from the Liquor Syndicate should be set off against the returned income, granting relief of Rs. 1 lakh to the appellant.

9. Levy of surcharge:
The appellant contested the levy of surcharge, arguing that it should not apply as the search took place before the amendment to section 113. The Tribunal noted that this issue was pending before the Special Bench, Hyderabad, and dismissed this ground for statistical purposes, allowing the appellant to file a miscellaneous application after the Special Bench's decision.

Conclusion:
The Tribunal partly allowed the appeal, deleting the addition of Rs. 36,07,720 and providing relief of Rs. 1 lakh for the income from the Liquor Syndicate. The issue of surcharge was left pending based on the Special Bench's future decision.

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