The main legal point established in the judgment is the requirement for the assessee to prove the investment in the construction of chimney to the satisfaction of the assessing Officer, and the restriction of the addition to the proved amount.

1. This appeal has been preferred by the assessee against the order of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar dated 28.7.2005 in ITA No.84 (ASR)/2004, in respect of assessment year 2000-01, proposing following substantial questions of law:-

"1]. Whether on facts and circumstances of the case, the tribunal was right in law in sustaining an addition of rs.1,18,000/- towards investment in construction of air pollution Control Device, despite appreciating that the source of the said investment stood duly explained by the assessee and accepted by the authorities below?

2]. Whether on the facts and circumstances of the case the tribunal was right in law in rejecting the assessees specific ground of appeal which involved adjudication upon a question of law on the basis of facts borne on record, pertaining to entitlement of the assessee towards depreciation on assets, when the particulars of said assets were duly furnished to the AO, in light of the fact that on omission of section 34 (1), the assessee was statutorily entitled to depreciation under section 32 (1) r. w. Section 29 of the Income Tax Act, 1961 , merely on the ground that the said ground was not taken before the authorities below?

3]. Whether on the facts and circumstances of the case the tribunal despite appreciating that there was no suppression of sales by the assessee and still further no cognizance of the retracted agreement of the assessee agreeing to be assessed at an incoem of Rs.4 lacs could be taken, was right in law by not accepting the sales reflected by the assessee and therein arbitrarily substituting the same by an estimated figure?"

2. The assessee filed return of income for the assessment year 2000-01 declaring income of Rs.1,84,784/-. On 3.3.2000, survey was carried out under section 133 of the Income Tax Act, 1961 (for short, the act) at the business premises of the assessee and inventory of stocks of bricks, coal and wood was prepared. The case was taken up for scrutiny. The assessee admitted that goods and registers were not complete. Investment of Rs.3,80,000/- in April/may 1999 for construction of Air pollution Control Device (Chimney) (APCD) was also admitted. The assessing Officer observed that the assessee could not justify the investment out of the income declared and offered additional income of rs.1,50,000/- as per order sheet dated 24.1.2002 which was signed by the assessee. Accordingly, addition of amount was made to the income of the assessee. The assessee preferred an appeal and submitted that source of investment was duly shown in the capital statement filed before the assessing Officer and, therefore, addition was not justified. The CIT (A)dismissed the appeal.

3. On further appeal, the Tribunal held that part addition was justified as the difference counted by the Assessing Officer was rs.1,18,000/- and the Assessing Officer was not justified in making addition to the extent of surrender. The appeal of the assessee was, accordingly, allowed to this extent, as per finding recorded in para 5.3.

4. Learned counsel for the assessee submitted that the source of assessee for having received 80000 bricks from his brother having been explained and no payment having been made by the assessee, the addition was not justified and, therefore, the finding was vitiated. Reliance was placed on judgment of the HON BLE Supreme Court in Commissioner of income Tax V/s. Smt. PK Noorjahan, (1999) 237 ITR 570, to submit that discretion under section 69 of the Act to treat unexplained income of the assessee as income from other sources could be exercised only where the explanation of the assessee was not satisfactory and not otherwise.

5. We are unable to accept the submission made.

6. The Tribunal partially accepted the plea of the assessee, while reducing the surrendered addition from Rs.1,50,000/- to Rs.1,18,000/- while recording the following findings:

"5.3. On consideration of the above submissions and the findings of the auth