2005 (7) TMI 317 - AT - Income Tax

Summary

Issues:
1. Addition for short cash
2. Notional interest for investment in KVPs
3. Addition in respect of shares
4. Notional interest on FDRs
5. Addition based on simple estimates
6. Addition of gifts received
7. Deletion of addition of income already shown

Issue 1: Addition for short cash
The appeal by the Revenue concerned a block assessment order under s. 158BC of the Act for the block period of 1988-89 to 1998-99. The AO made an addition of Rs. 2,87,800 based on the statement made by the assessee recorded under s. 132(4) of the Act. However, as no cash was found during the search, the CIT(A) deleted this addition citing provisions of s. 69A of the Act. The Tribunal upheld the CIT(A)'s decision, emphasizing that a statement recorded during a search does not equate to actual findings during the search, leading to the dismissal of the first ground of appeal.

Issue 2: Notional interest for investment in KVPs
The AO added notional interest for investment in KVPs by the assessee's wife, which was later deleted by the CIT(A) as the amount had been duly disclosed in the books of account. The Tribunal confirmed the deletion, stating that disclosed amounts cannot be subject to addition in block assessment orders, resulting in the dismissal of this ground.

Issue 3: Addition in respect of shares
An addition of Rs. 2,50,000 in respect of shares for various assessment years was made by the AO, which was deleted by the CIT(A). The Tribunal noted that the investments in shares were duly disclosed in the books of account and were verifiable, leading to the dismissal of this ground of appeal.

Issue 4: Notional interest on FDRs
The AO added notional interest on FDRs taken by the assessee's wife, which was similar to the KVPs investment issue. The Tribunal dismissed this ground, stating that no notional income can be taxed as undisclosed income.

Issue 5: Addition based on simple estimates
An addition of Rs. 1,84,045 was made on the basis of simple estimates for various assessment years. The Tribunal held that without any incriminating documents found during the search, no addition could be made on an estimate basis in block assessment, resulting in the dismissal of this ground.

Issue 6: Addition of gifts received
The AO made additions for gifts received by the assessee's wife, which were later deleted by the CIT(A). The Tribunal upheld the deletion, emphasizing that when gifts were verifiable from balance sheets and books of account, no addition could be made during block assessments.

Issue 7: Deletion of addition of income already shown
The CIT(A) deleted additions of income already shown in regular books of account or below taxable limits. The Tribunal dismissed this ground, highlighting that undisclosed income cannot include income already disclosed or below taxable limits as per the Act's definition.

In conclusion, the Tribunal dismissed the appeal of the Department, upholding the decisions of the CIT(A) on various grounds of addition and deletion in the block assessment order.