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2010 (12) TMI 966 - HC - Income TaxSearch and seizure - Undisclosed income - Revenue contended that transaction recorded in seized diary had not been duly accounted for in the books of account of the assessee - Held that - Tribunal rightly remanded back the file to AO on ground that merely on the ground that cheques were found entered in the diary, which was actually not received or recorded in regular book on subsequent date, cannot be made the basis for making the addition, unless some contrary material is found by the department. ITAT had observed that each cheque number, date of clearing and the name of the party from whom cheque was received was noted in the diary were duly found to be entered in regular books. Merely because there was some difference in the date of actual realization of cheques or actual sending cheques by the customers as compared to the date on which customers have assured for sending such payment, cannot be made the reason for treating the same as unaccounted income of the assessee - Decided against the Revenue
Issues Involved:
1. Legitimacy of the addition of Rs. 35,75,110/- as undisclosed income. 2. Inclusion of Rs. 30,000/- as undisclosed income. 3. Assessment of the total undisclosed income at Rs. 36,67,380/-. 4. Penalty proceedings under Section 158BFA (20). Issue-wise Detailed Analysis: 1. Legitimacy of the addition of Rs. 35,75,110/- as undisclosed income: The Assessing Officer (AO) identified transactions amounting to Rs. 35,75,110/- in a seized diary (Annexure A-59) during a search operation. The AO concluded that these transactions were business-related and not recorded in the assessee's books, thus treating them as undisclosed income. The assessee argued that Rs. 21,75,000/- of these transactions were accounted for in the books, while Rs. 14,00,110/- belonged to Mr. V.K. Khosla personally. The CIT(A) accepted the assessee's claim regarding the Rs. 14,00,110/- and deleted this amount from the undisclosed income. However, the CIT(A) upheld the addition of Rs. 21,75,000/- as undisclosed income, noting inconsistencies in the assessee's explanations. The ITAT remanded the issue back to the AO for fresh consideration, emphasizing the need for verifying the cheques and the actual receipt of payments. 2. Inclusion of Rs. 30,000/- as undisclosed income: The AO included Rs. 30,000/- as undisclosed income based on cash payments to Mr. Malhotra and Mr. Ranjeet, which were not recorded in the books. The assessee explained that these payments were temporary advances to employees of customers for urgent cargo clearance. The CIT(A) upheld this addition, noting the lack of evidence for repayment. The ITAT, however, disagreed, stating that without statements from Mr. Malhotra and Mr. Ranjeet or contrary evidence, there was no basis for the addition. The High Court agreed with the ITAT's reasoning and upheld the deletion of this amount. 3. Assessment of the total undisclosed income at Rs. 36,67,380/-: The AO computed the total undisclosed income as Rs. 36,67,380/-, including Rs. 62,273/- of unexplained cash, Rs. 35,75,110/- from Annexure A-59, and Rs. 30,000/- from Annexure A-5. The CIT(A) and ITAT reviewed these components, leading to the deletion of Rs. 14,00,110/- and Rs. 30,000/-, and remanding the remaining Rs. 21,75,000/- for fresh assessment. The High Court upheld the ITAT's decision, emphasizing the need for proper verification and opportunity for the assessee to present evidence. 4. Penalty proceedings under Section 158BFA (20): The AO initiated penalty proceedings under Section 158BFA (20) due to the discrepancy between the declared income of Rs. 12,00,000/- and the determined undisclosed income of Rs. 36,67,380/-. Given the remand of the primary issue of Rs. 21,75,000/- and the deletion of other amounts, the penalty proceedings would depend on the final determination of the undisclosed income upon reassessment. Conclusion: The High Court confirmed the ITAT's decision to remand the issue of Rs. 21,75,000/- for fresh assessment and upheld the deletion of Rs. 14,00,110/- and Rs. 30,000/- from the undisclosed income. The Court found no substantial question of law for further consideration and dismissed the appeal, with no order as to costs.
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