2004 (9) TMI 367 - AT - Income Tax

Summary

Issues Involved:
1. Unexplained investment in real estate business.
2. Deduction claims for bad debts, professional fees, and professional tax.
3. Reference to the valuation officer for house property construction.
4. Imposition of interest under section 234A.
5. Adjustment of seized amount against advance tax.

Issue-wise Detailed Analysis:

1. Unexplained Investment in Real Estate Business:
The assessee claimed that Rs. 5 lakhs from the firm M/s. Khivsara Lunkad & Co.'s declaration of Rs. 10 lakhs was available for investment. The Assessing Officer rejected this claim, stating that the declaration made by the assessee was separate from the firm's disclosure. The CIT(A) upheld this view, considering the arguments as afterthoughts unsupported by evidence. However, the Tribunal, following its earlier decision in a similar case, allowed the claim, noting that the amount was indeed available for investment and directed the exclusion of Rs. 5 lakhs to avoid double taxation.

2. Deduction Claims for Bad Debts, Professional Fees, and Professional Tax:
The assessee claimed deductions for bad debts amounting to Rs. 3 lakhs, professional fees of Rs. 10,000, and professional tax of Rs. 600. The Assessing Officer disallowed these claims, stating there was no evidence of business activities or maintenance of books of account for the real estate business. The CIT(A) confirmed the disallowance. The Tribunal upheld the disallowance of bad debts, citing the lack of evidence and proper write-off in books. However, it remanded the issue of professional fees and tax to the Assessing Officer for re-adjudication after giving the assessee an opportunity to furnish evidence.

3. Reference to the Valuation Officer for House Property Construction:
The Assessing Officer referred the valuation of the house property to the Valuation Officer, who estimated the cost at Rs. 28.75 lakhs, leading to an addition of Rs. 11.62 lakhs. The assessee contested the reference and the valuation method. The Tribunal found procedural lapses in the reference and valuation process and directed the Assessing Officer to refer the matter to the District Valuation Officer for a fresh valuation after giving the assessee an opportunity to present objections.

4. Imposition of Interest under Section 234A:
The Assessing Officer imposed interest under section 234A for late filing of the return. The Tribunal noted that the due date for filing was a closed day, and the return was filed on the next working day. Following the CBDT Circular No. 639, the Tribunal held that the return was filed within the time limit and directed the deletion of the interest charged.

5. Adjustment of Seized Amount Against Advance Tax:
The assessee requested the adjustment of Rs. 1 lakh seized during the search against advance tax. The Assessing Officer adjusted it against tax on regular assessment. The Tribunal, following the Madhya Pradesh High Court's decision in Manohar Lal v. CIT, held that the adjustment should be treated as advance tax paid and directed the cancellation of consequential interest charged.

Separate Judgments by Judges:
The Judicial Member dissented on the deletion of Rs. 5 lakhs and the Rs. 3 lakhs claim, suggesting these should be reconsidered by the Assessing Officer. The Third Member, Vice President, agreed with the Accountant Member on the deletion of Rs. 5 lakhs and the Rs. 1 lakh related to Phiroz Mistry but sided with the Judicial Member on remanding the Rs. 2 lakhs claim for fresh adjudication. Consequently, the appeal was partly allowed for statistical purposes.