2012 (12) TMI 638 - AT - Income Tax

Inadequate Drawings - Held that - In the absence of any finding of fact that the appellant had infact incurred the estimated expenditure on drawings, during the relevant financial years, the addition made towards drawings u/s 69C is bad in law - thus pursuing the materials available on record there is no evidence on record for making these additions. No material was found during the course of search to indicate any suppression of drawings and the drawings admitted by the assessee are unreasonable - no evidence brought on record by the Revenue in support of the addition made in the assessment order towards inadequate drawings - against revenue. Unexplained Income - CIT(A) directing the AO to assess income under the head other sources as against u/s 69B - Held that - The order of the CIT (A) needs no interfere as he has recorded the finding of fact that the AO had only assessed whatever was offered by the assessee and such sum was not detected by the AO. As no material was placed on record suggesting that the assessee has made payment over and above the documentary value for purchase of the property as alleged in the assessment order the order of the CIT (A) in holding that the amounts offered by the assessee voluntarily in his return of income should be assessed as income from other sources and not be assessed as unexplained investment under section 69B is confirmed - against revenue. Unexplained Cash - Held that - The cash seized in the course of search at the residence of the assessee is out of cash balance available in the books of account of M/s. Everbright Exports, which is the proprietory concern of the assessee. The Everbright Export had been regularly assessed before the Assessing Officer at Vellore. It is located at Satyamangalam on the Chennai-Bangalore Highway and in the premises of this concern, books were maintained and were also subjected to audit under section 44AB. This concern exists right from 2004 and it is not an afterthought of the assessee later to the date of search. Therefore, CIT (A) deleted the addition made u/s 69 - against revenue. De novo assessment made under section 153(A) - Held that - As per provisions of section 153A to 153C it provides for fresh assessments for six years preceding the year of search and assessments need not be confined to issues based on the materials found during the course of search Levy of Interest - Since levy of interest under section 234B is only consequential, no force in the ground taken by the assessee. Deduction under section 10B - Delay in filing returns - Held that - When the assessee is making a claim for the first time before the CIT(A) it is not proper and correct in rejecting the assessee s claim on the ground that there is no claim made in the return of income when such claim is otherwise allowable - CIT(A) should have entertained the claim of the assessee on merits without rejecting the additional ground stating that no claim is made in the returns.

Issues Involved:
1. Deletion of additions towards inadequate drawings.
2. Assessment of Rs. 2,85,00,000/- under the head 'other sources' versus Section 69B.
3. Deletion of addition towards unexplained cash amounting to Rs. 7,05,000/-.
4. Sustaining de-novo assessment under Section 153(A).
5. Denial of liability to interest under Section 234B.
6. Claim for deduction under Section 10B.

Issue-wise Detailed Analysis:

1. Deletion of Additions Towards Inadequate Drawings:
The Revenue argued that the Commissioner of Income Tax (Appeals) erred in deleting additions made towards inadequate drawings for the assessment years 2002-03 to 2008-09. The Assessing Officer had made additions based on estimated drawings, but the Commissioner of Income Tax (Appeals) found no material evidence indicating suppression of drawings. The Commissioner noted that the cost of living in Vellore was lower than in Bangalore, where similar drawings were accepted. The Tribunal upheld the Commissioner's findings, stating no evidence was provided to support the Revenue's claim, thus rejecting the grounds raised by the Revenue.

2. Assessment of Rs. 2,85,00,000/- Under the Head 'Other Sources' versus Section 69B:
The Assessing Officer added Rs. 2.85 crores as unexplained investment under Section 69B, inferred from notings in a diary. The assessee argued there was no fresh material evidence from the search to support this, and the seller denied receiving excess money. The Commissioner of Income Tax (Appeals) held that the income should be assessed under 'other sources' as offered by the assessee, not under Section 69B, as there was no evidence of excess investment. The Tribunal upheld this decision, finding no reason to interfere with the Commissioner's order.

3. Deletion of Addition Towards Unexplained Cash Amounting to Rs. 7,05,000/-:
The Assessing Officer added Rs. 7,05,000/- as unexplained cash seized during the search. The assessee contended this cash was part of the balance in the cash book of Everbright Exports, a proprietory concern. The Commissioner of Income Tax (Appeals) accepted this explanation, noting the concern had been regularly assessed and the books were not rejected by the Assessing Officer. The Tribunal upheld the Commissioner's findings, seeing no valid reason to interfere.

4. Sustaining De-novo Assessment Under Section 153(A):
The assessee argued that the de-novo assessment under Section 153(A) should be confined to search materials. However, the Tribunal referred to its decision in Harvey Heart Hospitals Ltd. v. ACIT, which held that assessments under Sections 153A to 153C are for six years preceding the search and are not confined to search materials. The Tribunal upheld the Commissioner's decision on this issue.

5. Denial of Liability to Interest Under Section 234B:
The assessee contested the liability to interest under Section 234B. The Tribunal noted that the levy of interest under Section 234B is consequential and found no force in the assessee's ground, thus rejecting it.

6. Claim for Deduction Under Section 10B:
The assessee claimed the Commissioner of Income Tax (Appeals) did not consider the additional ground for deduction under Section 10B due to delayed filing caused by search proceedings. The Tribunal noted that the Commissioner should have entertained the claim on merits, citing the Supreme Court's decision in CIT v. Kanpur Coal Syndicate, which states the appellate authority's powers are co-terminus with those of the Income Tax Officer. The Tribunal restored the issue to the Commissioner for fresh consideration on merits.

Conclusion:
The Tribunal dismissed all the appeals of the Department and the cross objections of the assessee except for the claim under Section 10B, which was partly allowed and remanded for fresh consideration.

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