2015 (10) TMI 2577 - AT - Income Tax

Refund in relation to surplus sum - differential amounting between Rs. 1.75 crores alleged unaccounted income reduced by the actual sum declared of Rs. 27 lacs - Held that - Revenue has failed to produce any material evidence supporting the impugned addition amount of Rs. 1.48 crores added merely on the basis of a very much vague and conditional disclosure statement of Shri Patel which stands retracted later on. We hold in these facts the Assessing Officer and the CIT(A) have erred in making the above stated additions in assessee s as its unaccounted income. The same stands deleted. Other arguments narrated in preceding paragraphs have been rendered infructuous Penalty u/s 271AAA - Held that - There is no dispute that this penalty sum of Rs. 14.80 lacs relates to addition of Rs. 1.48 crores made in the course of quantum proceedings as deleted in assessee s appeal. That being the case we hold that the impugned penalty has no legs to stand.

Issues Involved:
1. Refund of Rs. 54,85,781/- related to Rs. 1,48,00,000/- conditionally offered as income.
2. Validity of the addition of Rs. 1,48,00,000/- as unaccounted income.
3. Legitimacy of the penalty under section 271AAA of Rs. 17,50,000/-.

Issue-wise Detailed Analysis:

1. Refund of Rs. 54,85,781/- related to Rs. 1,48,00,000/- conditionally offered as income:
The assessee appealed against the CIT(A)'s decision upholding the AO's action of not granting a refund of Rs. 54,85,781/-. The amount of Rs. 1,48,00,000/- was conditionally offered by the appellant as income to cover discrepancies in seized documents and assets. The AO, upon completion of assessment proceedings, did not identify any unexplained asset, investment, income, or expenditure amounting to income. The assessee argued that the tax paid on the conditionally offered amount should be refunded as it cannot be treated as chargeable income under any section of the Income Tax Act.

2. Validity of the addition of Rs. 1,48,00,000/- as unaccounted income:
The assessee, a manufacturer and seller of PVC films and power, was subjected to a search by the department, resulting in the seizure of documents and assets. Statements from the director admitted unaccounted income of Rs. 2.25 crores, including Rs. 1.10 crores initially and Rs. 1.15 crores later. The AO treated these disclosures as voluntary and precise, rejecting the assessee's retraction and treating Rs. 1.75 crores as unaccounted income. The CIT(A) upheld this view. However, the ITAT noted that the statements were vague and conditional, lacking specific incriminating evidence. The Board's circular emphasized evidence collection over confessional statements. The ITAT concluded that the revenue failed to provide material evidence supporting the addition, thus deleting the addition of Rs. 1.48 crores.

3. Legitimacy of the penalty under section 271AAA of Rs. 17,50,000/-:
The Revenue appealed for restoring the penalty of Rs. 17,50,000/- under section 271AAA, which was 10% of the disclosed sum of Rs. 1.75 crores. With the deletion of Rs. 1.48 crores from the assessed income, the penalty related to this amount was rendered unsustainable. The ITAT upheld the deletion of the penalty, leaving only the admitted income of Rs. 27 lacs subject to penalty, thus dismissing the Revenue's appeal.

Conclusion:
The ITAT allowed the assessee's appeal for the refund and deletion of the addition of Rs. 1.48 crores, finding the disclosure statements vague and unsupported by evidence. The Revenue's appeal for restoring the penalty was dismissed due to the deletion of the corresponding addition. The order was pronounced on 14-10-2015.

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