2011 (9) TMI 755 - HC - Income Tax

Addition - Search and seizure - Undisclosed income - Block assessment - the documents seized were rightly treated as document depicting the transactions between the assessee and the Jitu Virmani who was a business associate of the assessee and whatever has been written off in the seized document was not the figment of imagination - There is no doubt about the fact that while framing the assessment even under Section 143 (3) of the Act, the Assessing Officer may omit to make certain additions of income or omit to disallow certain claims which are not admissible under the provisions of the Act thereby leading to escapement of income whether the CIT (A), in exercise of power under Section 251 (1) (a) of the Act has the power to enhance the assessment in the manner done in the instant case - According to the assessee the CIT (A) had discovered a new source of income not considered by the AO in his order and, therefore, the CIT (A) had no such power under Section 251(a) (a) of the Act - when this matter/item is considered but addition on that account is not made in the assessment order, it would clearly follow that the Assessing Officer had determined the same in the course of assessment by deciding not to make any addition - Decided against the assessee

Issues Involved:
1. Addition of Rs. 10,00,000 on the basis of pages 16 and 17 of Annexure A-1.
2. Addition of Rs. 10,00,000 on account of an alleged payment made to Mr. Jitu Virmani on the basis of notes on page 24 of Annexure A-1.
3. Addition of Rs. 20,00,000 on account of an amount received from Mr. Jitu Virmani on the basis of notings on page 27 of Annexure A-1.
4. Enhancement of assessment of undisclosed income of Rs. 25,00,000 on account of payment allegedly received from Mr. Jitu Virmani on the basis of notings in page 21 of Annexure A-1.
5. Enhancement of assessment of an alleged undisclosed income of Rs. 1,05,00,000 on account of an alleged payment received back in respect of transactions of Chellagatta property on the basis of notings in page 21 of Annexure A-1.
6. Whether the CIT (A) could enhance the income not considered by the Assessing Officer, in view of the judgment in Commissioner of Income Tax Vs. Sardari Lal & Co.
7. Whether the ITAT failed to appreciate that the burden to establish undisclosed income was on the revenue.

Issue-wise Detailed Analysis:

1. Addition of Rs. 10,00,000 on the basis of pages 16 and 17 of Annexure A-1:
The addition was based on documents seized during a search, indicating that the appellant received Rs. 10 lakhs from Mr. Roop Chand Indermal Singhi. The appellant's explanation that the amount was used for unaccounted expenses was found untenable. The Tribunal noted that the appellant provided inconsistent explanations and upheld the addition.

2. Addition of Rs. 10,00,000 on account of an alleged payment made to Mr. Jitu Virmani on the basis of notes on page 24 of Annexure A-1:
The seized documents indicated transactions involving properties in Bangalore, purchased through Mr. Jitu Virmani. The Tribunal found that the appellant's explanation that both 10 C and 25 CH represented cheques was not credible. The documents were deemed to depict actual transactions, and the addition was upheld.

3. Addition of Rs. 20,00,000 on account of an amount received from Mr. Jitu Virmani on the basis of notings on page 27 of Annexure A-1:
This addition was based on notings indicating a further sum of Rs. 20 lakhs received from Mr. Jitu Virmani for the Rajaji Nagar property. The Tribunal upheld the addition, finding that the documents depicted real transactions between the appellant and Mr. Virmani.

4. Enhancement of assessment of undisclosed income of Rs. 25,00,000 on account of payment allegedly received from Mr. Jitu Virmani on the basis of notings in page 21 of Annexure A-1:
The CIT (A) enhanced the assessment based on notings indicating a receipt of Rs. 25 lakhs from Mr. Jitu Virmani. The appellant's explanations were inconsistent, and the CIT (A) concluded that the amount was received but not reflected in the books of accounts. The Tribunal agreed with this finding.

5. Enhancement of assessment of an alleged undisclosed income of Rs. 1,05,00,000 on account of an alleged payment received back in respect of transactions of Chellagatta property on the basis of notings in page 21 of Annexure A-1:
The CIT (A) found that the appellant received Rs. 1.05 crores in cash, which was not accounted for. The Tribunal upheld this finding, noting discrepancies in the appellant's explanations and the consistency of the seized documents with the CIT (A)'s conclusions.

6. Whether the CIT (A) could enhance the income not considered by the Assessing Officer, in view of the judgment in Commissioner of Income Tax Vs. Sardari Lal & Co.:
The court held that the CIT (A) had the power to enhance the assessment under Section 251(1)(a) of the Act, as the Assessing Officer had considered the issue during the assessment process. The court distinguished between considering an issue and making an addition, finding that the CIT (A) did not discover a new source of income but addressed an issue already considered by the Assessing Officer.

7. Whether the ITAT failed to appreciate that the burden to establish undisclosed income was on the revenue:
The court found that the ITAT properly appreciated the evidence and the burden of proof. The findings were based on the seized documents and the appellant's inconsistent explanations. The court upheld the additions and enhancements, finding no reason to interfere with the Tribunal's conclusions.

Conclusion:
The appeal was dismissed, with the court upholding the additions and enhancements made by the CIT (A) and affirmed by the ITAT. The court found that the CIT (A) had the power to enhance the assessment and that the findings were based on proper appreciation of evidence.

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