2011 (6) TMI 503 - HC - Income Tax

Settlement proposed to avoid unnecessary remands and repeated appeals - search and seizure - undisclosed income - Department having strong case against assessee - Held that - Since assessee during course of assessment showed willingness to agree for a further addition of Rs.10 lacs, which is a sacrifice from the relief granted by the first appellate authority as well as the Tribunal. We, therefore, accept the offer made by the assessee. Assessing Officer will modify the revised orders issued by limiting the relief granted by the CIT (Appeals), which is confirmed by the Tribunal in respect of investment in FD receipts as relatable to Trusts. Appeals allowed

Summary

Issues:
1. Whether undisclosed income of the assessee belonged to a Trust or not.
2. Validity of the explanation provided by the assessee during assessment.
3. Acceptance of settlement offer by the assessee.

Analysis:
1. The appeals filed by the Revenue concerned an Astrologer who had undisclosed income seized during a search. The assessee initially admitted the investments were from professional income but later claimed they belonged to a Trust. The Trust was registered after the search, raising doubts. The Tribunal accepted the Trust explanation, but during the appeal hearing, the Court found no evidence supporting the Trust claim in seized documents or statements. The assessee agreed to settle by adding Rs.10,00,000 to the assessment to avoid further litigation. The Court accepted the settlement offer, modifying the assessment by adding the agreed amount.

2. The assessee's explanation that the funds belonged to a Trust was not supported by evidence from the search or initial statement. Despite the Trust being registered after the search, the first appellate authority and Tribunal accepted the explanation. During the appeal hearing, the Court noted the lack of reference to the Trust in seized documents or statements. The Court found the Revenue had a strong case due to the absence of evidence supporting the Trust claim, leading to the acceptance of the settlement offer by the assessee.

3. The Court accepted the settlement offer made by the assessee to add Rs.10,00,000 to the assessment, considering it a reasonable compromise to avoid further litigation. By accepting the offer, the Court modified the orders of the Tribunal and the first appellate authority, making the additional assessment. The Court highlighted that rejecting the offer would only lead to a remand and further appeals, prolonging the litigation process. The settlement offer was deemed acceptable, and the Court allowed the appeals by modifying the assessment based on the agreed amount.