2013 (5) TMI 125 - HC - Income Tax

Search U/s 132 (1) - Block assessment U/s 158BC - Regarding understatement of cost of renovation of residence - Held that - An addition based on pure estimation cannot be made in block assessment proceedings and as such the assessee succeeds on these grounds. Unexplained and unsecured loans - Held that - These unsecured loans have already been declared in the regular returns We find no error in the order of the Tribunal observing that accretion to the capital accounts stood disclosed and was not unearthed during the course of the search and, therefore, it could be subject matter of regular assessment and not the block assessment. Undisclosed investment - Held that - The ITAT observed that documentary evidence was to be given more credence as compared to the statement given without having the benefit of relying on the documentary evidence. This is again a matter of appreciation of evidence. Addition under the realm of suspicion - Held that - Learned counsel for the Revenue argued that the addition was based on the documents found in the residence of the assessee. However, the said document No.90 was examined by the ITAT and found to be dumb document . The addition was, thus, rightly deleted. No question of law arises. Deleting the addition in the absence of any evidence - Held that - A finding of fact is recorded to the effect that the assessee had already considered the income earned on this account in the Commission Income Statement. The ITAT has recorded the finding of fact that assessee had earned only commission income on the transaction and, therefore, there could not have been any such addition. Estimating the commission - Held that - we find that addition was made by the Assessing Officer estimating 4% commission on every deal through the assessee. The ITAT found this to be on very high side and reduced it to 2%. Cogent reasons are given in para 15.4 of the orders passed by the ITAT. Deleting the addition on account of undisclosed income based on documentary evidence - Held that - A finding of fact is arrived at that there is no undisclosed income. The ITAT has discussed the matter in detail and in right perspective. Deleting the addition on account of acquisition of plot in the name of assessee s wife - Held that - we find that plot was purchased by the assessee s wife. This income was added to the assessee s account only on the ground that assessee s wife did not have any source of income. Rs.26,000/- is hardly an amount. This can be the savings of the housewife also. No question of law arises here as well. Deletion of Rs.2,28,000 -Held that - The Tribunal found that it was based on Document No.10 which was a sale transaction of Rs.2,28,000/-. The ITAT, on the basis of evidence, found that the assessee was only an agent and was only earning commission and he had himself not entered into any sale agreement. The ITAT had, therefore, modified the order by directing that commission of 2% on Rs.2,28,000/- be added. Again, it is not a question of law. - Decided against the revenue.

Issues Involved:

1. Deletion of additions on account of understatement of cost of renovation.
2. Deletion of additions on account of unexplained unsecured loans.
3. Credibility of documentary evidence versus statements of the assessee.
4. Deletion of additions on account of profit from property deals.
5. Deletion of additions on account of profit from sale/purchase of land.
6. Estimation of commission income.
7. Deletion of additions on account of undisclosed income based on documentary evidence.
8. Deletion of additions on account of acquisition of plot in the name of the assessee's wife.
9. Calculation of commission on income.
10. Deletion of various additions based on best judgment assessment due to non-cooperation.
11. Estimation of profit from running of committee/lottery business.
12. Deletion of additions on account of jewellery and valuable items found during the search.

Detailed Analysis:

1. Deletion of Additions on Account of Understatement of Cost of Renovation:

The ITAT deleted the additions made by the Assessing Officer (AO) regarding the understatement of the cost of renovation of a residence. The AO based the additions on the valuation report of the Assistant Valuation Officer (AVO). However, the ITAT noted that no material was found during the search to support the AO's estimation. The ITAT emphasized that additions in block assessment proceedings must be based on material found during the search. The valuation report was deemed unreliable as it was based on an inspection conducted years after the relevant period without any supporting documents.

2. Deletion of Additions on Account of Unexplained Unsecured Loans:

The ITAT deleted the additions related to unexplained unsecured loans, stating that these loans had already been declared in the regular returns. The Tribunal held that such loans could not be considered 'undisclosed income' and should be the subject of regular assessment, not block assessment.

3. Credibility of Documentary Evidence Versus Statements of the Assessee:

The ITAT deleted the addition of Rs. 30,000/- made by the AO on account of undisclosed investment in M/s Royal Spinning Mills. The AO based the addition on the assessee's statement during the search. However, the ITAT gave more credence to the documentary evidence, which showed an investment of Rs. 1,70,000/- already disclosed in the balance sheet and accepted by the department.

4. Deletion of Additions on Account of Profit from Property Deals:

The ITAT deleted the addition of Rs. 3,00,000/- made by the AO on account of profit from property deals. The Tribunal found that the addition was based on suspicion and conjectures without any reliable documents. The document relied upon by the AO was deemed a 'dumb document' by the ITAT.

5. Deletion of Additions on Account of Profit from Sale/Purchase of Land:

The ITAT deleted the additions related to the profit from the sale/purchase of land, stating that the assessee had already considered the income earned on this account in the Commission Income Statement. The Tribunal found that the assessee had only earned commission income on the transactions.

6. Estimation of Commission Income:

The AO estimated a 4% commission on every deal through the assessee, which the ITAT found to be on the higher side and reduced to 2%. The Tribunal provided cogent reasons for this reduction in its detailed analysis.

7. Deletion of Additions on Account of Undisclosed Income Based on Documentary Evidence:

The ITAT deleted the addition of Rs. 9,66,000/- made by the AO based on a document found during the search. The Tribunal found that the document pertained to a property deal by one Sh. Siraj, and the assessee had only earned commission on the transaction, which was already declared.

8. Deletion of Additions on Account of Acquisition of Plot in the Name of Assessee's Wife:

The ITAT deleted the addition of Rs. 26,000/- related to the acquisition of a plot in the name of the assessee's wife. The Tribunal found that this amount could be the savings of the housewife and did not warrant an addition to the assessee's income.

9. Calculation of Commission on Income:

The ITAT modified the AO's addition of Rs. 2,28,000/- by directing that a 2% commission on this amount be added instead. The Tribunal found that the assessee was only an agent and did not enter into any sale agreement himself.

10. Deletion of Various Additions Based on Best Judgment Assessment Due to Non-cooperation:

The ITAT deleted various additions made by the AO based on the best judgment assessment due to the assessee's non-cooperation. The Tribunal analyzed each addition and found that they were based on suspicion, surmises, and conjectures without substantial evidence.

11. Estimation of Profit from Running of Committee/Lottery Business:

The ITAT reduced the AO's estimation of profit from running a committee/lottery business from 5% to 2.5%. The Tribunal found the AO's estimation to be unsupported by reasons and provided a detailed basis for the reduction.

12. Deletion of Additions on Account of Jewellery and Valuable Items Found During the Search:

The ITAT deleted the additions related to jewellery and valuable items found during the search. The Tribunal found that the source of such investments was not proved by the AO and deemed the additions erroneous and perverse.

Conclusion:

The High Court dismissed the appeals, finding that the ITAT's decisions were based on factual findings and appreciation of evidence, with no substantial questions of law arising in the cases.

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