JETHMAL F.SONI,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, (INV) -1(1), PUNE

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ITA 677/PUN/2018Status: DisposedITAT Pune23 September 2022AY 1990-914 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal affirmed the addition of unexplained cash as the assessee failed to provide satisfactory explanation. A lump sum addition of Rs. 1.00 lakh was made for gold ornaments, and the deemed interest income addition was deleted as the assessee followed the cash system of accounting.

What were the facts?

During a search, unexplained cash of Rs. 85,335/- and gold ornaments worth Rs. 3,24,720/- were found. The assessee claimed the cash was part redemption from customers in his money lending business, and the gold ornaments belonged to customers. Deemed interest income of Rs. 1,34,100/- was also added.

What were the issues?

Whether the cash and gold ornaments found during search are unexplained income, and if deemed interest income should be added when the assessee follows the cash system of accounting.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH,

Before: SHRI S.S.GODARA & DR.DIPAK P.RIPOTE

For Appellant: Shri Tanaji Shelke
For Respondent: Shri Ramnath P. Murkunde – DR
Hearing: 13/09/2022Pronounced: 23/09/2022

Per S.S.Godara, JM:

1.

This assessee’s appeal for A.Y.1990-91 is directed against the Commissioner of Income Tax(Appeals)-1, Pune’s order dated 26.12.2017 passed in Case No.PN/CIT(A)1/DCIT, Cir.4/PN/Tr.470/16- 17, in proceedings u/s.143(3) r.w.s.263 of the Income Tax Act, 1961, in short “the Act”. Heard both the parties. Case file perused.

2.

The assessee’s first and foremost substantive ground seeks to reverse both the lower authorities action adding unexplained cash of Rs.85,335/- found during the course of search dated 08-08-1989. Learned Counsel’s sole substantive argument to rebut the CIT(A) detailed discussion in Para Nos. 5 to 5.9 is that the same represents part

A.Y. 1990-91 Jethmal F. Soni redemption since received from the customers involving their respective pledged/mortgaged jewellery items in assessee’s money lending business. We find that the impugned addition is based on various receipts sought to be claimed as part redemptions in FY. 1989-90 pertaining to AY 1990-91, meaning thereby, that a time period of more than 3 decades has elapsed. We sought to note from learned counsel as to whether the corresponding customers had ever redeemed their pledged jewellery subsequent to the search or not. No specific reply has been received from the assessee’s side. He has failed to explain source of the impugned unexplained cash found during the search in issue. We affirm this first and foremost addition.

3.

Next comes gold ornaments addition of Rs.3,24,720/- found/seized from the search premises representing the assessee’s shop as well as residential accommodation. It transpires during the course of hearing that neither the assessee has been able to explain the gold ornaments as belonging to his customers nor the Revenue has given him the credit of permissible family jewellery in light of CBDT Circular No.1916 dated 11-05-1994. Faced with this situation, we deem it appropriate that a lump sum addition of Rs.1.00 lakh out of the impugned sum of Rs.3,24,720/- would be just and proper with the rider that the same shall not be treated as a precedent. The assessee gets relief of Rs.2,24,720/- in other words.

A.Y. 1990-91 Jethmal F. Soni

4.

The assessee’s third substantive ground seeks to reverse both the lower authorities action making deemed interest income addition of Rs.1,34,100/- in money lending business. Learned departmental representative could hardly dispute that the impugned sum has not been added on ‘actual receipt basis’ once the assessee follows ‘cash system of accounting’. The Revenue vehemently contended that the assessee to be assessed as per ‘mercantile system of accounting’. We find no merit in the Revenue’s instant arguments once the search in issue has not indicated any evidence about the assessee having actually received the impugned interest amount. This addition of Rs.1,34,100/- stands deleted accordingly.

5.

Learned counsel does not press for the assessee’s last substantive ground challenging addition of Rs.93,614/- representing the difference in capital of money lending activity keeping in mind the smallness of the amount. Rejected accordingly.

6.

No other ground or argument has been pressed before us.

7.

This assessee’s appeal is partly allowed in above terms. Order pronounced in the open Court on 23rd September, 2022.

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