2012 (9) TMI 656 - HC - Income Tax

Addition on undisclosed income u/s 158BC - Assessee contended that it was wrong on the part of the A.O not to accept his computerized books accounts - Held that - Considering explanation given by the assessee for the absence of books of accounts at the hospital as well as the delay in filing the accounts as book the books of accounts were taken by the Chartered Accountant for preparing and filing return such circumstances could not be treated as adverse as the assessee had disclosed the income more than the receipt as per the seized record. Revenue has not been able to point out any provisions in the Income Tax Act, 1961 which makes it mandatory for a person for maintaining the books of accounts at his residence or at his business premises & the AO was not justified in refusing to admit the books of accounts specially when the returned income was more than the receipts during the seizure - in favour of assessee.

Summary

Issues:
1. Acceptance of computerized accounts by the Assessing Officer.
2. Justification of additions made by the Assessing Officer.
3. Obligation to maintain books of accounts at residence or business premises.
4. Adverse inference due to delay in filing books of accounts.

Analysis:
1. The primary issue in this case was the acceptance of computerized accounts by the Assessing Officer. The assessee contended that the regular books of account were available with their Chartered Accountant (CA) and produced computerized accounts during assessment. However, the AO rejected them as concocted, leading to an addition of undisclosed income. The CIT (A) upheld this addition, but the ITAT allowed the appeal, emphasizing the duty of the authorized officer to enforce recovery of books from the CA or verify their maintenance. The Tribunal found the addition unjustified as the receipts in the regular books exceeded the figures of addition.

2. The Assessing Officer had made additions to the income based on incriminating materials found during a search, despite the receipts being recorded in the books of accounts produced by the assessee. The Tribunal held that the additions were not justified as the declared receipts in the regular books were higher than the figures of addition, indicating proper accounting.

3. Another crucial issue was whether it was mandatory for a person to maintain books of accounts at their residence or business premises. The Tribunal ruled against the revenue, stating that there was no provision in the Income Tax Act, 1961, making it obligatory to keep books of accounts at specific locations. The AO's refusal to admit the books of accounts, especially when the returned income exceeded the seized receipts, was deemed unjustified.

4. The delay in filing the books of accounts was considered an adverse circumstance by the Assessing Officer. However, the Tribunal disagreed, noting that the assessee had disclosed income higher than the seized record. The explanation provided for the absence of books at the hospital and the delay in filing them was deemed insufficient to draw adverse inferences.

In conclusion, the High Court dismissed the Income Tax Appeal, upholding the decisions of the ITAT in favor of the respondent-assessee. The judgment clarified the obligations regarding the acceptance of accounts, justification of additions, and the absence of a legal mandate for maintaining books of accounts at specific locations.