2012 (12) TMI 481 - AT - Income Tax

Addition on account of undisclosed income - Assessee was engaged in the business of financing Addition made on the basis of some loose papers relating to loan found during search Assessee contended that advances were made out of cash balance available which was lent, refunded and re-lent and received back Held that - Very mere amount has been shown towards drawings and other expenses. During A.Y. 2004-05 there is negative cash balance. Considering the additional income declared by the assessee and in absence of maintenance of regular books of accounts an amount of Rs. 2 lakhs on estimate in our opinion may be allowed as set off for investment in financing out of the income disclosed. The grounds raised by the assessee are partly allowed. Addition on account of cash found as undisclosed income Held that - Since the assessee in his statement recorded u/s. 132(4) has categorically admitted that the cash found is his extra income for the A.Y. 2007-08 and since the funds available as per the cash flow statement has already been given credit for the financing business, therefore, no further benefit can be given to the assessee towards the cash found during the course of search. Upholding the addition made by the AO. Issue decides in favour of revenue. Unexplained investment u/s 69A - Addition on account of notings in the loose papers regarding purchase of jewellery Assessee submit that inherited jewellery was given for remaking the new jewellery Held that - As it is clearly mention on loose papers that weight of old jewellery given for melting valued out of which new ornaments made, therefore, no justification on the part of the learned CIT(A) for sustaining the addition. Accordingly the same is directed to be deleted. Issue decides in favour of assessee

Issues Involved:
1. Addition of Rs. 3,61,025 out of Rs. 6,00,000 for A.Y. 2006-07.
2. Addition of Rs. 9,10,000 out of Rs. 10,00,000 for A.Y. 2007-08.
3. Addition of Rs. 6,69,742 on account of unexplained cash for A.Y. 2007-08.
4. Addition of Rs. 3,78,674 and Rs. 11,183 on account of notings in loose papers regarding purchase of jewellery for A.Y. 2006-07.

Issue-wise Detailed Analysis:

1. Addition of Rs. 3,61,025 out of Rs. 6,00,000 for A.Y. 2006-07:
The assessee, a member of the Jain Oswal Nagori group, was subject to a search and seizure operation where certain hundies were seized. The AO added Rs. 6,00,000 as unaccounted income, doubting the revised cash flow statement prepared post-search. The CIT(A) provided a partial relief by giving a telescoping benefit of Rs. 2,38,975 based on interest income declared in previous years, sustaining Rs. 3,61,025. The Tribunal allowed an additional set-off of Rs. 2,00,000, reducing the sustained addition to Rs. 1,61,025, considering the nature of the money-lending business and the lack of regular books of accounts.

2. Addition of Rs. 9,10,000 out of Rs. 10,00,000 for A.Y. 2007-08:
Based on seized documents, the AO added Rs. 10,00,000 as loan amounts financed by the assessee. The CIT(A) provided a telescoping benefit of Rs. 90,000 for interest income declared in the previous year, sustaining Rs. 9,10,000. The Tribunal provided an additional set-off of Rs. 50,000, reducing the sustained addition to Rs. 8,60,000.

3. Addition of Rs. 6,69,742 on account of unexplained cash for A.Y. 2007-08:
During the search, cash of Rs. 10,88,100 was found, but only Rs. 4,18,358 was accounted for. The AO added the differential amount of Rs. 6,69,742 as unexplained income. The CIT(A) upheld this addition, noting the assessee's admission during the search and the lack of corroborative evidence for the additional cash flow statement. The Tribunal found no further cash balance available for set-off and upheld the CIT(A)'s order.

4. Addition of Rs. 3,78,674 and Rs. 11,183 on account of notings in loose papers regarding purchase of jewellery for A.Y. 2006-07:
Seized documents indicated purchases of jewellery. The AO added Rs. 6,04,378 as unexplained investment. The CIT(A) deleted Rs. 2,00,192, accepting the explanation for part of the jewellery as converted from old jewellery. However, he sustained Rs. 3,78,674 and Rs. 11,183 due to lack of evidence for the source of acquisition. The Tribunal deleted the addition of Rs. 3,78,674, agreeing that the notings should be read as a whole, indicating conversion of old jewellery. However, it upheld the addition of Rs. 11,183 due to lack of corroborative evidence.

Conclusion:
The Tribunal partly allowed the appeals, providing reliefs based on the nature of the business and available evidence, while upholding additions where explanations were insufficient or unsupported.

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