2006 (10) TMI 254 - AT - Income Tax

Assessment order u/s 143(3) - additional income - survey proceedings u/s 133A - HELD THAT - Once every purchase is collated with the sale thereof in terms of quantum as well as value, no further burden remains to be discharged by the assessee unless any discrepancy or falsity is pointed out in such collation. The Assessing Officer has not raised even a finger of doubt at this account statement furnished by the assessee during the course of assessment proceedings. That being so the only course open to the Assessing Officer was to accept the disclosed trading results. We are therefore satisfied that in the instant case the assessee has been able to discharge the heavy burden that rested upon him while retracting from offer of additional income at the time of survey. As we have pointed out earlier even at that stage the case of the assessee was that the offer was made to buy peace and not because of any concealment of income or discrepancy in accounts detected by survey authorities. Thus, we delete the addition made by the Assessing Officer and upheld by the learned CIT(A) - In the result, this appeal is allowed.

Summary

Issues:
Assessment of additional income declared during survey proceedings under section 133A.

Analysis:
The appeal was filed against the assessment of a sum of Rs. 25 lakhs by the assessee, which was declared as additional income during survey proceedings under section 133A. The survey revealed an under-statement of closing stock based on the average rate of gross profit. The assessee offered the additional income to avoid litigation, but did not disclose it in the income tax return. The Assessing Officer added the income to the declared amount, which was upheld by the CIT(A) leading to the current appeal.

During the hearing, the assessee argued that the offer of additional income was conditional and demonstrated fluctuations in profit margins, contrary to the survey authorities' conclusions. The authorities were criticized for ignoring the detailed data provided by the assessee during assessment. The legal position on retracting an offer of additional income was discussed, emphasizing that the burden on the assessee to retract such an offer is heavy. The assessee provided detailed trading activity information during assessment, showing variations in profit rates and matching purchases with sales, which was not disputed by the Assessing Officer.

The tribunal found that the offer of additional income was made to avoid controversy and litigation, not as an admission of undisclosed income. The assessee had explained the business transactions thoroughly during assessment, demonstrating variations in profit rates and providing detailed account statements. As the Assessing Officer did not raise any doubts on the provided information, the tribunal concluded that the burden was discharged by the assessee in retracting the offer of additional income. Consequently, the addition of Rs. 25 lakhs was deleted, and the appeal was allowed.