2014 (9) TMI 1078 - AT - Income Tax

Addition on income surrendered - survey under section 133A - Held that - Once the assessee is unable to offer any plausible explanation for the sum surrendered by the assessee and merely relying on the retraction made on a later date, does not absolve the assessee from its liability. The CIT (Appeals) while upholding the order of the Assessing Officer had given a finding that the surrender was made by the assessee based on the material alleged to be in the possession of the Assessing Officer collected during the course of survey and the said surrender was made voluntarily. The assessee had failed to controvert the said findings of the CIT (Appeals) and merely because it had taken a stand after a considerable gap of time that it withdraws its surrender, is mere after thought and such retraction of surrender cannot be accepted. Further bills and cash were found from the possession of the assessee and supporting documents, which establish the case of the Revenue that the assessee was in possession of assets/cash over and above the asset declared in the books of account against which surrender was made by the assessee. Upholding the order of the CIT (Appeals) we find no merit in the grounds of appeal raised by the assessee in this regard and the said are dismissed.

Summary

Issues Involved:
1. Validity of assessment order under Section 144 of the Income Tax Act, 1961.
2. Disallowance of salary and interest to partners under Section 184(5).
3. Addition of Rs. 20 lacs for retracted surrender.
4. Addition of Rs. 3,45,000 under Section 68.
5. Addition of Rs. 97,158 for payments outside books.
6. Addition of Rs. 1,82,400 towards collection of outstanding amounts.
7. Addition of Rs. 30,980 towards previous year expenses.
8. Addition of Rs. 16 lacs for retracted surrender in the second appeal.
9. Addition of Rs. 1,37,345 on gross profit.
10. Addition of Rs. 3,677 and Rs. 4,998 for payments outside books in the second appeal.

Detailed Analysis:

1. Validity of Assessment Order under Section 144:
The appeal challenged the upholding of the assessment order under Section 144 by the CIT(A). The Tribunal noted that the assessment was completed ex-parte under Section 144 due to the assessee's failure to furnish information despite several notices. The CIT(A) upheld this order, rejecting the assessee's claims of contradictory findings and misuse of powers.

2. Disallowance of Salary and Interest to Partners under Section 184(5):
The assessee contested the disallowance of salary and interest to partners amounting to Rs. 96,000 and Rs. 97,737, respectively. The CIT(A) upheld this disallowance, invoking the provisions of Section 184(5). The Tribunal did not provide further details on this issue in the final judgment, as it was not pressed by the assessee during the hearing.

3. Addition of Rs. 20 lacs for Retracted Surrender:
The primary issue addressed was the addition of Rs. 20 lacs based on the retracted surrender during a survey under Section 133A. The assessee argued that the surrender was made under pressure and retracted later. The Tribunal, however, upheld the CIT(A)'s decision, stating that the retraction was not substantiated with evidence and was made after a considerable gap. The Tribunal emphasized that mere retraction without evidence does not absolve the assessee from liability, especially when discrepancies in stock and cash were noted during the survey.

4. Addition of Rs. 3,45,000 under Section 68:
The assessee challenged the addition of Rs. 3,45,000 under Section 68, claiming it was made without proper appreciation of records. The CIT(A) upheld this addition, and the Tribunal did not delve into this issue further as it was not pressed by the assessee during the hearing.

5. Addition of Rs. 97,158 for Payments Outside Books:
The addition of Rs. 97,158 for payments treated outside the books was contested by the assessee. The CIT(A) upheld this addition, and the Tribunal did not provide further details on this issue as it was not pressed during the hearing.

6. Addition of Rs. 1,82,400 towards Collection of Outstanding Amounts:
The assessee disputed the addition of Rs. 1,82,400 towards the collection of outstanding amounts. The CIT(A) upheld this addition, and the Tribunal did not address this issue further as it was not pressed during the hearing.

7. Addition of Rs. 30,980 towards Previous Year Expenses:
The assessee contested the addition of Rs. 30,980 towards previous year expenses. The CIT(A) upheld this addition, and the Tribunal did not elaborate on this issue as it was not pressed during the hearing.

8. Addition of Rs. 16 lacs for Retracted Surrender in the Second Appeal:
In the second appeal, the assessee challenged the addition of Rs. 16 lacs based on retracted surrender. The Tribunal applied its reasoning from the first appeal, upholding the CIT(A)'s decision and dismissing the assessee's claims of retraction without evidence.

9. Addition of Rs. 1,37,345 on Gross Profit:
The assessee contested the addition of Rs. 1,37,345 on gross profit, arguing it was made without proper appreciation of records. The CIT(A) upheld this addition, and the Tribunal did not provide further details as it was not pressed during the hearing.

10. Addition of Rs. 3,677 and Rs. 4,998 for Payments Outside Books in the Second Appeal:
The assessee disputed the additions of Rs. 3,677 and Rs. 4,998 for payments outside books. The CIT(A) upheld these additions, and the Tribunal did not address these issues further as they were not pressed during the hearing.

Conclusion:
The Tribunal dismissed both appeals, upholding the CIT(A)'s decisions on all contested issues. The primary focus was on the addition of Rs. 20 lacs (and Rs. 16 lacs in the second appeal) based on retracted surrender, which was upheld due to lack of evidence supporting the retraction. Other issues were not pressed by the assessee during the hearing and were consequently dismissed.