2011 (5) TMI 369 - HC - Income Tax

Addition - Reassessment - undisclosed income - The assessee had also spent a sum of Rs. 26,88,450/- on cycle rickshaw publicity & video van publicity as well as banners and, therefore, net amount was taken to the profit and loss account - The CIT (A) accepted this explanation and deleted the addition, inter alia, observing that the net income had been taken @ 15% at the receipt - The learned counsel for the Revenue is that the purported expenditure of Rs.26,88,450/- on account of cycle rickshaw publicity & video van publicity as well as banners etc. is accepted without any proof thereof - Accordingly, the matter is remitted back to the AO who shall verify the records of the assessee and go into the veracity of expenditure of Rs.26,88,450/- claimed by the assessee.

Summary

Issues:
Reassessment under Section 148 of the Income-Tax Act for the assessment year 1995-96 based on documents retrieved from Fena Ltd.'s premises. Addition of Rs.43,23,457 as undisclosed income due to a difference in gross receipts. Dispute regarding the explanation provided by the assessee for the difference in receipts. Appeal against the addition of undisclosed income.

Analysis:
The High Court considered a case involving a reassessment notice served under Section 148 of the Income-Tax Act for the assessment year 1995-96, based on documents found during a search at Fena Ltd.'s premises. The reassessment order included an addition of Rs.43,23,457 as undisclosed income, stemming from a variance in gross receipts declared by the assessee. The Assessing Officer noted a significant difference between the amount deposited in the bank account and the sum reflected in the profit and loss account. The assessee attributed this difference to telecast charges received from SACI Allied Products Ltd., along with other receipts. The CIT (A) accepted the explanation and deleted the addition after considering the net income at 15% of the receipts, a decision upheld by the Tribunal.

The Revenue challenged the allowance of expenditure amounting to Rs.26,88,450 on cycle rickshaw publicity, video van publicity, and banners, contending that there was no substantiating evidence for these expenses. The Court acknowledged the Revenue's submission and agreed to remit the matter back to the Assessing Officer for further verification. Both parties, including the assessee's counsel, accepted this course of action. Consequently, the Court directed the AO to examine the records, validate the claimed expenditure, and issue a fresh order based on the evidence provided by the assessee.

In conclusion, the High Court disposed of the appeal by remitting the case to the Assessing Officer for a thorough examination of the disputed expenditure, ensuring the veracity of the expenses claimed by the assessee. This decision highlights the importance of substantiating expenses to avoid additions as undisclosed income during reassessment proceedings, emphasizing the need for proper documentation and evidence to support claims made by taxpayers.