2012 (4) TMI 304 - HC - Income Tax

Search and seizure - Undisclosed income - assessee s claim was that the actual sale as against the later agreement was for an amount of Rs. 1,32,40,000/- and not for Rs.2 crores as is revealed from the earlier agreement - Assessing Officer has noticed that the Stamp paper used for the agreement dated 23.5.2000 and 1.6.2000 has both been purchased on 23.5.2000 from the very same vendor - It is not clear as to how the Tribunal came to the finding that the agreement dated 23.5.2000 was one which was not enforceable and we are afraid that no reasonable person could reach the conclusions arrived at by the Tribunal - Held that The documents seized on search as also the statement recorded under section 132(4) provides ample evidence to support the actual consideration of Rs.2 crores and we answer the question of law raised by the revenue in favour of the revenue since the deletion made by the Tribunal was without adverting to the material seized and conclusion of the Tribunal with respect to the actual sale consideration is unreasonable and perverse. Regarding set off of carried forward loss from the assessment year 1999-2000 - Assessing Officer as well as the 1st appellate authority treated the same as undisclosed income for the assessment year 2000-01 - assessee failed to file a return in the assessment year 2000-01 and only after the search on 4.10.2001 and notice under Section 158BC dated 9.10.2002 filed a return of income in Form No.2B for the block period 1.4.1995 to 4.10.2001 that too on 19.2.2003 - Decided against the assessee

Summary

Issues:
1. Interpretation of sale agreement and undisclosed income.
2. Disallowance under Section 40A(3).
3. Treatment of addition of Rs. 90,101 as undisclosed income.
4. Surcharge under Section 113.
5. Consideration of additions based on statement under Section 132(4).

Issue 1: Interpretation of sale agreement and undisclosed income:
The case involved a partnership firm engaged in trading milk products. After a search, documents suggested an undisclosed sale of the firm for Rs. 2 crores. The assessee contended the actual sale was for a lower amount due to reduced milk processing. The Assessing Officer relied on seized documents to confirm the sale at Rs. 2 crores. The Tribunal, however, found the seized agreement unreliable, stating it contained inflated figures. The High Court disagreed, noting lack of evidence to discredit the agreement. Stamp paper purchases and related documents supported the Rs. 2 crores sale consideration. The Tribunal's deletion of the addition was deemed unreasonable and perverse.

Issue 2: Disallowance under Section 40A(3):
The Assessing Officer disallowed Rs. 8,31,036 under Section 40A(3). The Tribunal, considering the nature of the business, deleted the disallowance. The High Court found no reason to interfere with the Tribunal's decision, as it did not raise any legal question.

Issue 3: Treatment of addition of Rs. 90,101 as undisclosed income:
The addition of Rs. 90,101, shown in Form 2B for 2000-01, was treated as undisclosed income by the Assessing Officer and confirmed by the 1st appellate authority. The Tribunal allowed the set-off, assuming a parallel regular assessment. The High Court disagreed, stating no such regular assessment existed, and restored the addition as undisclosed income.

Issue 4: Surcharge under Section 113:
The Tribunal ruled in favor of the Revenue on the surcharge issue, which was not appealed by the assessee. The individual assessments were to be addressed separately.

Issue 5: Consideration of additions based on statement under Section 132(4):
The Tribunal deleted certain additions based on statements under Section 132(4), citing lack of seized materials and retractions. The High Court disagreed, emphasizing the evidentiary value of such statements and directed the Tribunal to reconsider based on established legal principles.

In conclusion, the High Court partly allowed ITA 18 of 2010, sustaining additions based on the sale agreement. The undisclosed income of Rs. 90,101 for 2000-01 was upheld. Appeals regarding individual partners were remanded to the Tribunal for fresh consideration, aligning with the High Court's findings and legal principles.