2001 (12) TMI 211 - AT - Income Tax

Summary

Issues Involved:
1. Validity of block assessment order due to non-issuance of notice u/s 143(2).
2. Sustenance of addition based on loose paper (LP-I).
3. Addition on account of unexplained cash.
4. Disallowance of deduction out of capital gains.
5. Disallowance of deduction for cost of construction and material purchase.

Summary:

1. Validity of Block Assessment Order (Ground No. 1):
The assessee contended that the block assessment order dated 29th Oct 1999 was invalid due to non-issuance of notice u/s 143(2). The Department provided evidence showing that notice u/s 143(2) was issued and received by the assessee. The Tribunal found the Department's evidence convincing and rejected the assessee's contention, thereby upholding the validity of the assessment order.

2. Sustenance of Addition Based on Loose Paper (Grounds Nos. 1.1, 1.2, 1.3, Ground No. 5 & Ground No. 6.1(l)):
The addition of Rs. 13,50,000 was based on a loose paper (LP-32) found during the search. The assessee denied any connection with the paper, claiming it belonged to Balwant Singh of Baldev Saree Centre. The AO and CIT(A) upheld the addition due to the assessee's failure to produce Balwant Singh. The Tribunal, however, found that the Department did not adequately verify the assessee's explanation or the document's authenticity. The Tribunal concluded that the addition was neither legally sustainable nor factually maintainable and deleted the addition of Rs. 13,50,000.

3. Addition on Account of Unexplained Cash (Grounds Nos. 3.1 & 3.2):
During the search, cash of Rs. 2,63,330 was found, of which Rs. 30,000 was disputed. The assessee initially claimed it was from a bank withdrawal but later attributed it to his HUF. The AO and CIT(A) rejected this explanation, and the Tribunal upheld this decision, stating that the assessee's retraction was not substantiated by solid evidence.

4. Disallowance of Deduction Out of Capital Gains (Grounds Nos. 2.5, 6.1(ii)):
The assessee claimed deductions for brokerage and map approval expenses related to the sale of property. The AO and CIT(A) disallowed these deductions due to lack of evidence. The Tribunal upheld this disallowance, agreeing with the CIT(A)'s findings.

5. Disallowance of Deduction for Cost of Construction and Material Purchase (Grounds Nos. 4.1, 4.2, 4.3, 4.4, 5 & 6.1(iv)):
The assessee claimed deductions for various construction expenses and material purchases. The AO allowed a 20% deduction instead of the 36% claimed by the assessee. The Tribunal upheld the 20% deduction but allowed a 5% deduction for material purchase savings, granting partial relief to the assessee.

Conclusion:
The Tribunal partly allowed the appeal, providing relief on certain grounds while upholding the Department's findings on others.