2012 (9) TMI 713 - AT - Income Tax

Addition on account of undisclosed purchase Assessee engage in sandal wood business During search u/s 132, AO found incriminating materials in respect of investment made in business CIT(A) estimated profit @ 20% of business Held that - When the material found during the course of search operation, discloses the investment made by the assessee and the assessee has also accepted the statement found in the seized material then it must be used by CIT(A). CIT(A) made addition without referring the seized material. Therefore issue remand back to CIT(A) Undisclosed investment u/s 69B During search AO founds that assessee made investment in shares which is more than amount shown in books Held that - Since both the parties have not filed the copies of the document before Tribunal. Therefore, Tribunal unable to verify the entries in the seized document. Therefore, orders of the lower authorities are set aide and the issue relating to investment is remitted back to the file of the AO Addition u/s 68 AO made addition on account of unexplained creditors Assessee submit the confirmation with CIT(A) CIT(A) set aside the order of AO for reconsideration Held that - CIT(A) has no power to set aside the assessment for reconsideration. But the fact remains is that the assessee has filed the confirmation letters from the creditors which needs to be considered by the AO in accordance with law. Issue remand back to file of AO.

Issues Involved:
1. Investment in sandalwood business.
2. Treatment of agricultural income as undisclosed income.
3. Investment in shares of M.A Motors.
4. NRI loan verification.

Detailed Analysis:

Investment in Sandalwood Business:
The first issue pertains to the investment in the sandalwood business amounting to Rs. 83,42,511. The assessee contested the addition made by the assessing officer, who had computed this amount based on seized materials during a search operation. The Commissioner of Income-tax(A) estimated the profit at 20% of the sales, confirming an addition of Rs. 49,71,500 and granting relief for Rs. 33,71,011. However, the Tribunal found that the Commissioner of Income-tax(A) did not adequately refer to the seized materials and thus set aside the order, remitting the issue back to the Commissioner for reconsideration based on the seized materials and subsequent examination.

Treatment of Agricultural Income as Undisclosed Income:
The next issue concerns the treatment of agricultural income as undisclosed income for the block period, amounting to Rs. 3,20,000. The assessee claimed agricultural income based on Rubber Board specifications but did not file returns for the assessment years 2001-02 to 2003-04. The assessing officer found discrepancies and assessed Rs. 8,24,706 as undisclosed income, which was reduced by the Commissioner of Income-tax(A) to Rs. 3,20,000 as "Income from other sources." The Tribunal upheld this decision, noting that the estimation by the assessing officer was not based on seized materials and that the cash flow statement alone could not justify the addition.

Investment in Shares of M.A Motors:
The revenue's appeal included the addition of Rs. 58,24,931 towards the investment in shares of M.A Motors. The assessing officer based this on seized materials showing an investment of Rs. 78,23,054, while the assessee's books reflected only Rs. 19,98,123. The Commissioner of Income-tax(A) deleted the addition, considering the seized documents as estimates for planning purposes. The Tribunal, noting the absence of the seized documents in its file, remitted the issue back to the Commissioner for reconsideration based on the materials found during the search operation.

NRI Loan Verification:
The final issue involves the verification of an NRI loan amounting to Rs. 5,97,574. The Commissioner of Income-tax(A) directed the assessing officer to verify the confirmation letters from creditors, which the revenue contested as a setting aside of the assessment order. The Tribunal acknowledged that while the Commissioner cannot set aside the assessment, the confirmation letters need to be considered by the assessing officer. Thus, the Tribunal remitted the issue back to the assessing officer for reconsideration in light of the confirmation letters.

Conclusion:
In conclusion, the Tribunal partly allowed both the appeals of the assessee and the revenue for statistical purposes, remitting several issues back to the Commissioner of Income-tax(A) and the assessing officer for reconsideration based on the seized materials and additional information.

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