2010 (9) TMI 1173 - HC - Income Tax

Summary

Issues involved: Appeal u/s 260-A of the Income Tax Act, 1961 regarding deletion of addition of suppressed sales amounting to Rs. 19,61,870 during Block Period 1.4.1989 to 7.12.1999.

Details of the Judgment:

1. The respondent-assessee, engaged in ship breaking, was subject to search action u/s 132(1) of the Act in the case of Madhupuri Group. The Assessing Officer initiated proceedings u/s 158BC read with 158BD against the assessee based on statements regarding accommodative entries of loans and purchase/sales by Shri Mahendra H. Shah. The AO made an addition of Rs. 19,61,870 on account of suppressed sales, which was deleted by the Commissioner (Appeals) and upheld by the Tribunal.

2. Assailing the Tribunal's order, the appellant-Revenue reiterated the AO's reasoning, emphasizing the lack of specific evidence linking the assessee to bogus sales. The Tribunal noted that no material was found during the search indicating higher sale consideration than recorded in the books. The addition was based on estimates and assumptions, not concrete evidence from the search.

3. The Tribunal highlighted that additions u/s 158BD can only be made based on material seized during the search or related inquiries. Since no evidence of undisclosed income was found during the search, and sale consideration was duly recorded in the books, the Tribunal held that block assessment couldn't replace regular assessment. The reliance on Shri Mahendra H. Shah's statement, which did not mention the assessee, was deemed insufficient to justify the addition.

4. The Tribunal's decision was based on the legal principle that block assessment cannot substitute regular assessment without concrete evidence of undisclosed income found during the search. As no legal error was found in the Tribunal's reasoning, the appeal was dismissed for lack of any substantial question of law.

In conclusion, the Tribunal's decision to delete the addition of suppressed sales was upheld based on the lack of concrete evidence linking the assessee to the alleged misconduct during the search conducted in the Madhupuri Group case.