2011 (9) TMI 172 - HC - Income Tax

Undisclosed income - bogus outstanding deposit - genuineness of the deposits - non production of the relevant books of accounts book statements computations etc. - Claim that part of property belong to wife of assessee - Held that - Though the assessee would contend that the Assessing Officer himself had admitted that 50% of the property belongs to the wife of the assessee and therefore the same shall be considered in her block assessment under section 158BD of the Act as per which she was assessed for the balance 50% share yet the Assessing Officer had found on an analysis of the assessee s returns that the assessee is a regular defaulter in filing his returns of income and that the returns for the assessment years 1991-92 1992-93 and 1996-97 were filed beyond the time limit prescribed under section 139 of the Act. On the basis of the above finding the Assessing Officer treated the returned income in the invalid returns filed for the said assessment years as undisclosed income of the assessee. - Decided against the assessee. Failure to furnish name and address of creditors - When the assessee himself had admitted in his sworn statement dated 02.03.2011 that he had not maintained proper books of accounts for his business transactions and also for other group concerns from the financial years 1998-99 till the date of search we are not inclined to give much weightage to the observation made by the Commissioner of Income Tax that the Assessing Officer ought not to have held that the documents produced by the assessee cannot be relied upon. Therefore we are of the opinion that the order passed by the Commissioner of Income Tax (A) and the Tribunal in this regard cannot be legally sustained. Details of deposits with confirmation -AO found that it was an after thought and that the assessee had not proved the genuineness of the deposits made even by filing confirmation letters and on that basis treated the entire deposits as on 31.03.1998 as bogus and taxed the same as unexplained expenditure of the assessment year 1998-99 - CIT(A) deleted the addition - ITAT confirmed the order of CIT(A) - Held that - Tribunal had not even given proper reasons for agreeing with the finding rendered by the Commissioner of Income Tax with regard to the above issue. This shows that the Appellate Tribunal had not dealt with the matter in a proper perspective. - no ground to take a different view than the one taken by the Assessing Officer in arriving at the undisclosed income of the assessee as referred to above. - Decided against the assessee. Source of making repayment of loan - AO found that the assessee did not have the source for making repayment of the loans - ITAT found that for the purpose of bringing to tax the undisclosed income there must be income unearthed out of the search conducted and in most of the cases all materials were filed before the conduct of search including the balance sheet and in some cases the entire sale consideration and capital gains arising therefrom were already disclosed and taxed. On the basis of the above finding the Tribunal held that such items of income cannot be brought to tax under the definition of undisclosed income as provided for under section 158B(b) of the Act. - Held that - assessee had not established before this court by producing concrete evidence that the undisclosed income arrived at by the Assessing Officer is incorrect. Therefore while holding that the Commissioner of Income Tax (A) as well as the Tribunal without appreciating the materials available on record in a proper perspective had rejected the appeal filed by the Revenue we hold that the Assessing Officer had given cogent reasons for arriving at the undisclosed income of the assessee. - Decided in favor of revenue.

Summary

Issues Involved:

1. Deletion of Rs. 42,00,000/- as undisclosed income.
2. Deletion of Rs. 60,72,900/- as bogus outstanding deposit.
3. Deletion of Rs. 13,83,000/- as undisclosed income.
4. Deletion of Rs. 26,63,130/- as undisclosed income without proper books of accounts.

Detailed Analysis:

1. Deletion of Rs. 42,00,000/- as Undisclosed Income:

The assessee and his wife jointly owned a property at Raja Street, Coimbatore, purchased during 1993-94 and sold during 1998-99 and 2000-01. The sale consideration was Rs. 30 lakhs, with an additional "on money" receipt of Rs. 42 lakhs. The assessee included this in the block returns. The Assessing Officer (AO) treated Rs. 42 lakhs as "income from other sources" due to lack of supporting documents. However, the Commissioner of Income Tax (CIT) and the Income Tax Appellate Tribunal (ITAT) found that the assessee had accounted for the indexed cost of the property correctly and deleted the addition. The High Court noted that the assessee admitted to receiving Rs. 72 lakhs, including "on money," and utilized it for repayments, confirming the AO's addition of Rs. 42 lakhs as undisclosed income.

2. Deletion of Rs. 60,72,900/- as Bogus Outstanding Deposit:

The assessee showed Rs. 60,72,900/- as outstanding liability in the jewellery chit business, but the ledgers indicated only Rs. 39,51,500/-. The AO treated the difference of Rs. 21,21,400/- as bogus credits. The CIT and ITAT found that the credits were recorded in the books of account and returns filed before the search, thus not treating them as undisclosed income. The High Court disagreed, noting the lack of proper books of accounts and supporting documents, and upheld the AO's addition.

3. Deletion of Rs. 13,83,000/- as Undisclosed Income:

During the search, fixed deposit receipt books revealed Rs. 13,83,000/- outstanding as on 31.03.1998. The AO treated these as bogus due to the absence of confirmation letters. The CIT and ITAT disagreed, stating no documents suggested the deposits were paid back before 31.03.1998. The High Court found the AO's addition justified due to the lack of evidence proving the genuineness of the deposits.

4. Deletion of Rs. 26,63,130/- as Undisclosed Income Without Proper Books of Accounts:

The AO found payments to various concerns and investments in M/s. United Fabrics without proper source explanations. The CIT and ITAT held that the AO did not establish the entries in the cash flow statements as non-genuine and that the assessee provided sufficient details. The High Court disagreed, noting the lack of regular books of accounts and supporting documents, and upheld the AO's addition.

Conclusion:

The High Court found the ITAT's order unjust and arbitrary, setting it aside and upholding the AO's additions. The questions of law were answered in favor of the Revenue and against the assessee.