2004 (9) TMI 580 - AT - Income Tax

Unexplained investments - additions made on the basis of some loose sheets found and seized in the course of search - Investment in shares and finance activities - Undisclosed income in the block period - unexplained receipts - Unexplained gold jewellery - HELD THAT - On examination, before the Assessing Officer, admittedly Shri Prem denied to have made payment to the assessee. However, the adverse inference drawn by the Assessing Officer seems based on the admission of Shri Prem to he had done business with Shri N.C. Daga for purchase and sale of shares of various companies. Shri Prem further stated that since there was a loss on these transactions no money was paid to Shri Daga. However, apparently for no valid reason, the Assessing Officer refused to rely upon the statement of Shri Prem. It would be relevant to have a reference to the remark of the Assessing Officer for making the impugned addition that it cannot be believed that the assessee received no payment from Shri Prem and yet the assessee recorded phrases like payment received . This, in our opinion, is not conclusive to frame an opinion that the assessee had undisclosed investments in the transactions. The assessee claims that he did not receive any money and the opposite party concerned also confirms the version of the assessee and under such circumstances, in our opinion, the Assessing Officer could not have given much significance to the scribbling in the loose papers. It has been held by many courts that entries found on a loose paper cannot have any authenticity or evidentiary value in itself. In the circumstances, we are of the opinion that there was no reason to disbelieve the statement given by Shri Prem, consequently, to make the impugned additions. It is, therefore, we have to agree with the contention of the learned counsel for he assessee that if the papers seized show that the assessee was not benefited in any manner, then it has to be accepted even if it results into no taxability because no tax can be thrusted on him if it is not due from him. In this view of the matter we delete the addition. This ground of the assessee succeeds. In the premises of the above decision, we do not find any merit in the addition being interest accrued which has been presumed to have been received by the assessee. Accordingly, we delete the same and ground 3 of the assessee also succeeds. Undisclosed income in the block period - Looking to the merit of the addition, we find merit in the contention of the assessee that the department cannot ignore some of the entries which did not suit to them and accept the other. When a material seized has to be relied upon, the entire content appearing on it should be considered. The chart depicted that on 31-3-1992 the assessee had given Rs. 4,88,965 to Mrs. Sushila Daga, wife of the assessee which was shown to have been received back on 1-4-1994. It would be significant to mention here that this has been disclosed by the assessee as undisclosed income in the return filed in response to notice issued u/s 158BC of the Act. The Assessing Officer disbelieved the entry of relating to the repayment on 1-4-1994. This, in our opinion, is not permissible in law. With regard to the other entry relating to receipt, we find that the asset was disclosed asset. Therefore, when the same was not during the course of search, the only presumption that could have been drawn was the same was sold out. It is seen that the Assessing Officer refused to recognize the entry only because no documentary evidence such as broker s note is filed. Here, we find merit in the contention of the assessee that for such cash transactions, no broker s note is issued. In view of these, we do not see any merit in the addition made by the Assessing Officer. Accordingly, we delete the additions. Grounds 4, 5 6 are allowed. Undisclosed investment in the capital of undisclosed activities of business appearing in the cash books marked - As has been contended by the assessee, the assessment order does not speak whether the assessee was confronted with the proposed addition or the Assessing Officer called for any explanation in this regard. It is a fact that the assessee had offered an undisclosed income of Rs. 5,39,622 upto 31-3-1996 which was available for rotation in the undisclosed activities undertaken from 1-6-1996. The learned DR did not seriously challenge the admission of the consolidated balance sheet for consideration nor the contents therein. We, therefore, admit the same for consideration. Upon consideration of the same, we are of the opinion that the assessee has successfully explained the amount appearing as opening capital balance in the said undisclosed business activities. The addition is therefore, deleted. Unexplained receipts - We do not see any merit in the addition firstly because, the said loose paper was not seized from the premises of the assessee. The loose paper does not specifically mentions the name of the assessee, nor the person, from whom the paper was seized admitted to have paid any money to the assessee. Accordingly we delete the addition. Ground 8 of the appeal is allowed. Unexplained gold jewellery - In our opinion, the assessee is still liable to explain the source of acquisition of the jewellery, which has not been done in the case before us. The instruction No. 1916 of the CBDT also cannot come to the help of the assessee for the simple reason that the instruction nowhere states that such jewellery found should be treated as explained and no addition towards the same should be made. The instruction only speaks that ornaments to the extent of 250 gms. in the hands of an unmarried lady and 100 gms. in the case of male person should not be seized. We, therefore, hold that the assessee failed to explain the source of acquisition of the impugned jewellery. Consequently, the addition made by the Assessing Officer stands. In the result, the appeal filed by the assessee is partly allowed.

Summary

Issues Involved:
1. Assessment of undisclosed income.
2. Addition of investment and interest on account of share sale.
3. Addition of interest receivable on shares sale.
4. Addition of undisclosed investments.
5. Addition of unexplained receipt.
6. Addition of unexplained investment in jewelry.
7. Addition of unexplained cash.
8. Addition due to suppression of profits.

Summary:

1. Assessment of Undisclosed Income:
The assessee contested the assessment of undisclosed income at Rs. 67,95,637 against the declared Rs. 11,43,050. The Tribunal found that the Assessing Officer (AO) based the additions on loose sheets without substantial evidence, leading to the deletion of the additional income assessed.

2. Addition of Investment and Interest on Account of Share Sale:
The AO added Rs. 34,00,771 as investment and interest from share sales to Mr. Prem, who denied any payment to the assessee. The Tribunal ruled that the AO's reliance on loose sheets and the rejection of Mr. Prem's statement were unfounded, thus deleting the addition.

3. Addition of Interest Receivable on Shares Sale:
The AO added Rs. 56,260 as interest receivable from Mr. Prem. The Tribunal, finding no substantial evidence to support the AO's claim, deleted this addition.

4. Addition of Undisclosed Investments:
The AO considered Rs. 33,225, Rs. 3,06,450, and Rs. 6,05,129 as undisclosed investments. The Tribunal held that the AO's reliance on loose sheets without corroborative evidence was unjustified, leading to the deletion of these additions.

5. Addition of Unexplained Receipt:
The AO added Rs. 40,000 based on loose papers seized from Mr. Sudhir Thakran's residence. The Tribunal found no direct evidence linking the assessee to the receipt, thus deleting the addition.

6. Addition of Unexplained Investment in Jewelry:
The AO added Rs. 1,84,400 for unexplained investment in jewelry. The Tribunal upheld this addition, ruling that the assessee failed to explain the source of acquisition.

7. Addition of Unexplained Cash:
The AO added Rs. 91,163 as unexplained cash found during the search. The Tribunal, finding inconsistencies in the assessee's explanations, upheld this addition.

8. Addition Due to Suppression of Profits:
The AO added Rs. 2,78,037 for suppression of profits based on seized annexures. The Tribunal found the AO's conclusions speculative and unsupported by concrete evidence, leading to the deletion of this addition.

Conclusion:
The appeal was partly allowed, with several additions made by the AO being deleted due to lack of substantial evidence and reliance on loose sheets.