1998 (9) TMI 114 - AT - Income Tax

Summary

Issues Involved:
1. Rate of Tax Applied to Income
2. Opportunity to Assessee for Material Collected
3. Addition of Rs. 4.83 Lakhs for Land Purchase
4. Addition of Rs. 5,46,093 for House Construction
5. Addition of Rs. 1,03,600 for Jewellery
6. Addition of Rs. 50,000 for FDRs

Summary:

1. Rate of Tax Applied to Income:
The Tribunal did not separately comment on this issue as it was related to other grounds raised by the assessee.

2. Opportunity to Assessee for Material Collected:
The Tribunal noted that the documents seized from Sh. Vinod Viyogi were not specifically confronted to the assessee. The Tribunal emphasized that the satisfaction of the Assessing Officer (AO) must be objective and backed by evidence. The Tribunal found that the AO failed to comply with the conditions stipulated in section 69 of the Income-tax Act, which are mandatory for assessment under section 143(3) read with section 158BC.

3. Addition of Rs. 4.83 Lakhs for Land Purchase:
The AO added Rs. 4.83 lakhs as income from undisclosed sources based on a document seized from Sh. Vinod Viyogi's residence. The Tribunal found that the AO did not confront the assessee with this document and failed to provide a satisfactory explanation for the addition. The Tribunal concluded that the AO did not follow the due course of law and deleted the addition of Rs. 4.83 lakhs.

4. Addition of Rs. 5,46,093 for House Construction:
The AO determined the cost of construction at Rs. 14,20,725 against Rs. 8,74,632 shown by the assessee. The Tribunal observed that the AO did not find any defect in the report of the registered valuer and ignored the explanation given by the assessee. The Tribunal found no sound basis for the addition and deleted Rs. 5,46,093.

5. Addition of Rs. 1,03,600 for Jewellery:
The AO gave credit for 45 tolas of jewellery and treated the balance of 66 tolas as unexplained. The Tribunal noted that the AO did not rebut the explanation given by the assessee and failed to comply with section 69A. The Tribunal allowed credit for jewellery based on CBDT instructions and restricted the addition to the balance of jewellery, directing the AO to recompute the addition.

6. Addition of Rs. 50,000 for FDRs:
The AO made an ad hoc addition of Rs. 50,000 for FDRs found during the search. The Tribunal noted that the AO did not rebut the explanation given by the assessee and found the explanation reasonable, considering the status of the family and customary practices. The Tribunal deleted the addition of Rs. 50,000.

Conclusion:
The appeal was partly allowed, with significant deletions in the additions made by the AO due to non-compliance with legal provisions and lack of evidence.