2016 (5) TMI 1428 - HC - Income Tax

Addition of sales inflation figure to the assessee s income - Held that - We have requested Mr.Khaitan to find out from the assessment order, the relevant information to show that the assessing officer did not dispute the inflation of the sums indicated by the Tribunal in its order. Mr.Khaitan was unable to show any such thing from the assessment order. Tribunal referred to something in the order of the assessing officer which is not there. The Tribunal without any evidence on record and without any admissible evidence having been adduced by the assessee, directed the assessing officer to exclude the amount of ₹ 2.90 Crores approximately and ₹ 5.90 Crores from the total income of the assessee for two block periods. We are, therefore, convinced that there is lot of substance in the submission advanced by Mrs.Gutgutia that this finding is perverse. We, therefore, add the following question of law Whether the order directing the assessing officer to exclude the amount of ₹ 2,90,43,971 and ₹ 5,90,21,000 being the sales and fictitious income from the total income for the two block periods is perverse ? Let the appeal be listed on 16th May, 2016 for hearing.

Summary

Issues:
1. Exclusion of fictitious income by the Income Tax Appellate Tribunal.
2. Justification for excluding inflated sales figures from the assessee's income.
3. Adequacy of proof provided by the assessee regarding inflated sales figures.
4. Dispute over the Tribunal's finding regarding the assessing officer's stance on inflated sums.

Analysis:
1. The appeal challenges a judgment directing the exclusion of specified sums, considered as fictitious income by the assessee, from the total income for two block periods. The Tribunal's rationale emphasized the need to exclude the entire inflation amounts for the block periods, not limited to the special auditor's report, as the assessing officer had not disputed the specified sums.

2. The primary legal issue revolves around the justification for excluding inflated sales figures from the assessee's income. The Tribunal's direction to exclude the sums was based on the absence of any restriction in its order limiting the exclusion solely to the special auditor's report. The Tribunal deemed it necessary to exclude the entire inflation amounts for the block periods to compute the undisclosed income accurately.

3. The adequacy of proof provided by the assessee regarding inflated sales figures was a point of contention. The assessing officer's failure to dispute the specified inflation sums led to the Tribunal's decision to direct their exclusion. However, the appellant raised concerns about the lack of concrete evidence or admissible proof supporting the exclusion, highlighting discrepancies in the provided details and the evidentiary value of the annexures referenced by the assessee.

4. A dispute arose over the Tribunal's finding that the assessing officer did not dispute the inflation sums mentioned in the order. The appellant argued that there was no evidence in the assessment order supporting this claim, indicating a potential error in the Tribunal's conclusion. The discrepancy raised questions about the validity of the Tribunal's directive to exclude the specified amounts from the assessee's total income, leading to the formulation of a new question of law regarding the perceived perversity of the order.

In conclusion, the judgment's scrutiny of the exclusion of fictitious income and inflated sales figures highlighted the importance of substantiated evidence and accurate assessment in determining undisclosed income for block periods. The issues raised underscore the need for clarity, consistency, and evidentiary support in tax assessments to ensure fairness and accuracy in income computations.