2011 (2) TMI 1432 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of unaccounted investment made by the assessee.
2. Deletion of unaccounted income on unaccounted investment.
3. Assessments on a protective basis pending appeals in the case of Saravana Constructions.
4. Failure to substantiate the claim of finance procured through various financiers.

Summary:

Issue 1: Deletion of Unaccounted Investment
The CIT (A) erred in deleting the unaccounted investment made by the assessee. The Revenue argued that the seized materials indicated that the assessee was involved in money lending to Saravana Constructions Pvt. Ltd. (SCPL). However, the CIT (A) found that the assessee was a small financier with limited capital and primarily acted as a finance broker. The CIT (A) deleted the protective addition in the assessee's hands, stating that the issue should be examined substantively in the hands of SCPL.

Issue 2: Deletion of Unaccounted Income on Unaccounted Investment
The CIT (A) also erred in deleting the unaccounted income on unaccounted investment. The Revenue contended that the interest income earned by the assessee on the unaccounted investment was evident from the seized materials. The CIT (A) concluded that the assessee did not have the means to indulge in such money lending activities and primarily earned income through commission as a finance broker.

Issue 3: Assessments on a Protective Basis
The assessments were made on a protective basis, pending appeals in the case of Saravana Constructions. The CIT (A) noted that the additions were made protectively in the hands of the assessee and could be substantive in the hands of SCPL. The CIT (A) deleted the protective addition in the assessee's hands, emphasizing that the issue should be examined substantively in the hands of SCPL.

Issue 4: Failure to Substantiate the Claim of Finance Procured
The CIT (A) ought to have appreciated that the assessee failed to substantiate the claim of finance procured through various financiers by producing necessary material evidence. The Revenue argued that the assessee did not provide confirmation letters or details of transactions made by other parties. The CIT (A) found that the assessee's books were not rejected, and the assessee was primarily a finance broker with limited capital for investment.

Conclusion:
The Tribunal concluded that the assessing officer was not within his domain to initiate action u/s 153C r.w.s. 153A of the Act against the assessee, as no books of account or incriminating documents pertaining to the assessee were seized during the search. The Tribunal upheld the CIT (A)'s decision to delete the protective additions in the assessee's hands and dismissed the Revenue's appeals for all the assessment years under challenge.