1990 (8) TMI 233 - AT - Income Tax

Summary

Issues Involved:
1. Unexplained acquisition of jewellery and its tax implications.
2. Loss claimed in respect of partnership in the name of Printo Board Production.
3. Loss on account of chit fund contributions.

Issue-wise Detailed Analysis:

1. Unexplained Acquisition of Jewellery and Its Tax Implications:

The primary issue revolves around the discovery of jewellery during a search on the premises of the assessee, which exceeded the amount declared in their wealth-tax returns. The jewellery found had a gold content of 1121.5 grams, out of which 610.4 grams remained unexplained. The Income Tax Officer (ITO) added Rs. 1,19,925 under section 69A of the Income Tax Act, attributing this amount to the unexplained jewellery. The assessee's explanation, including a cash-flow statement indicating available funds for the purchase of jewellery, was rejected by the ITO. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the ITO's decision in the case of the assessee but canceled the protective assessment in the case of the assessee's wife.

The Tribunal examined the arguments from both sides. The assessee contended that the jewellery belonged to both the assessee and his wife, and the cash-flow statement should be given credence. The Department argued that the explanation was insufficient and the burden of proof lay heavily on the assessee, which was not discharged satisfactorily. The Tribunal found that the explanation for the jewellery acquisition was rightly rejected by the authorities below. However, it agreed with the assessee's contention that the responsibility for explaining the entire jewellery should not rest solely on the assessee. The Tribunal decided to apportion the unexplained jewellery between the assessee and his wife in a 2:1 ratio, thus partly allowing both the assessee's and the department's appeals.

Separate Judgment by Judicial Member:

The Judicial Member disagreed with the Accountant Member's conclusion regarding the addition of Rs. 1,19,925. He emphasized that the cash-flow statement and affidavits provided by the assessee should be given credence and that it was unreasonable to expect the assessee to produce vouchers for all purchases made over several years. He directed the ITO to delete the addition of Rs. 1,19,925, thus allowing the assessee's appeal on this ground.

Reference to Senior Vice President:

Due to the difference of opinion, the matter was referred to the Senior Vice President, who, after reviewing the evidence and subsequent wealth-tax assessments, concluded that the jewellery was in existence prior to 1-4-1983. Hence, no addition could be made in the assessment year 1984-85. The Senior Vice President agreed with the Judicial Member, leading to the deletion of the addition in both the assessee's and his wife's cases.

2. Loss Claimed in Respect of Partnership in the Name of Printo Board Production:

The assessee claimed a loss from a partnership named Printo Board Production. The Tribunal noted that the assessee could not provide sufficient details regarding the actual years when such losses were incurred. After examining the material on record, the Tribunal upheld the authorities' decision to reject this claim, thus dismissing this ground of appeal.

3. Loss on Account of Chit Fund Contributions:

The assessee claimed a loss on account of contributions to a chit fund, arguing that these contributions represented actual business ventures. However, the Tribunal found that the assessee could not substantiate how the present accounting period was chosen for considering the amounts as irrecoverable. The Tribunal agreed with the authorities below that the claim was not justified and rejected this ground of appeal.

Conclusion:

In the result, both the appeals were partly allowed, with the Tribunal directing the deletion of the addition related to the unexplained jewellery and upholding the rejection of the loss claims related to the partnership and chit fund contributions.