2013 (5) TMI 742 - AT - Income Tax

Undisclosed income - search u/s. 132 - Held that - Regarding the addition of Rs.3.40 lakh in the case of Smt. Dipikaben Y Gandhi and of Rs.3.30 lakh each in the case of remaining two cases, since this much income was declared by these assessees in the revised return of income filed by them and consequential tax was also paid by them, there is no merit in the arguments of assessee regarding these additions in these three cases. Hence, this ground of assessee regarding addition decided against the assessee. Regarding addition of Rs.231,133/- in the case of Smt. Dipikaben Y Gandhi and Rs.2,41,133/- each in remaining two cases, was made by the AO on the basis of valuation report obtained by the assessee for which it was submitted by assessee before the CIT(A) that it was obtained for the purpose of obtaining loan from the bank. It is noted by the Assessing Officer that these three plots were purchased on 05-09-2001 and during the same year, construction was done and valuation report was obtained and the AO has not given even the date of valuation report. There is no finding given by CIT(A) as to how this submission of assessee that valuation report was obtained for the purpose of obtaining loan from the bank is not acceptable. Thus this further addition made by AO on the basis of so-called valuation report in the absence of any other cogent evidence, is not sustainable. therefore delete the same. As a result, assessee, Smt. Dipikaben Y Gandhi s case gets relief of Rs.2,31,133/- whereas the remaining two assessees get relief of Rs.2,41,133/- each - assessee s appeals are partly allowed.

Summary

Issues:
- Appeal against three separate orders of Commissioner of Income-tax (Appeals)-II, Ahmedabad for assessment year 2002-03.
- Validity of additions made by Assessing Officer in the assessment proceedings.
- Disallowance of expenses debited in profit and loss account.
- Addition based on valuation report for bungalow construction.
- Appeal against the decision of Ld. CIT(A) confirming two additions.

Analysis:
The judgment pertains to three connected appeals filed by different but related assessees against separate orders of Commissioner of Income-tax (Appeals)-II, Ahmedabad for the assessment year 2002-03. The appeals were heard together due to the identical and interconnected nature of the issues involved. The facts revolve around a search conducted under section 132 of the Income-tax Act, 1961 at the premises of an individual, leading to the discovery of books of accounts and documents belonging to the three assessees who are family members. Subsequently, the Assessing Officer issued notices under section 153C of the Act to file returns of income, which were duly filed by the assessees. The AO, however, did not accept the revised returns and made additions to the income declared by the assessees. The additions included disallowance of expenses debited in profit and loss accounts and an additional amount in relation to the alleged construction of a bungalow on a plot. The assessees appealed against the additions before the Ld. CIT(A), who deleted one addition but confirmed the other two, leading to the assessees approaching the Appellate Tribunal.

During the hearing before the Appellate Tribunal, arguments were presented by both parties, with the AR of the assessee reiterating the arguments made before the Ld. CIT(A). The Tribunal carefully considered the submissions, reviewed the materials on record, and examined the orders of the authorities below. In the first issue concerning the addition of undisclosed income in the revised returns, the Tribunal found no merit in the arguments put forth by the assessee's representative, thereby ruling against the assessee. However, in the second issue related to the additional amounts added based on a valuation report for bungalow construction, the Tribunal noted discrepancies in the AO's approach. The Tribunal observed that the AO had not provided sufficient evidence or reasoning to support the additions made solely on the basis of the valuation report, which was obtained for obtaining a bank loan. Consequently, the Tribunal held that the further additions were not sustainable and decided in favor of the assessees, granting them relief in the respective amounts.

In conclusion, the Tribunal partly allowed the appeals of all the assessees, deleting the additional amounts added based on the valuation report while upholding the disallowance of expenses in one case. The order was pronounced in open court, providing relief to the assessees in the form of reduced tax liabilities.