2009 (5) TMI 951 - AT - Income Tax

Summary

Issues Involved:
1. Addition of undisclosed income based on statements and diaries found during survey u/s 133A.
2. Ad hoc additions out of telephone expenses, motor-car expenses, and office expenses.
3. Interest computation u/s 234-B and 234-C.

Summary:

1. Addition of undisclosed income based on statements and diaries found during survey u/s 133A:
The assessee, a manufacturer and exporter of pharmaceutical medicines, was subjected to a survey u/s 133A on 05.12.2002. During the survey, two small diaries indicating unrecorded cash receipts were found and impounded. The main partner, under alleged coercion, declared an undisclosed income of Rs. 1,00,31,181/-. The assessee retracted this statement within ten days, claiming it was made under duress. The Assessing Officer (AO) rejected the affidavits of retraction and added Rs. 39,54,600/- to the income u/s 68, based on the diaries. The CIT(A) upheld this addition, emphasizing the evidential value of the diaries and the improbability of the partners acting against their interest. However, the ITAT found that the AO did not discharge the burden of proving the income, as no further verification or evidence was provided to substantiate the entries in the diaries. The ITAT directed the deletion of the addition, noting the lack of supporting material and the retraction of the statement.

2. Ad hoc additions out of telephone expenses, motor-car expenses, and office expenses:
The assessee challenged the ad hoc additions made by the AO out of telephone, motor-car, and office expenses. The ITAT upheld the findings of the CIT(A) on these issues, finding no reason to deviate from the conclusions drawn.

3. Interest computation u/s 234-B and 234-C:
The assessee sought consequential relief regarding the interest charged u/s 234-B and 234-C. The ITAT directed the AO to re-compute the interest chargeable under these sections.

Conclusion:
The appeal filed by the assessee was partly allowed, with the ITAT directing the deletion of the addition of Rs. 39,54,600/- and upholding the ad hoc additions and interest computation as per the CIT(A)'s findings.