2013 (10) TMI 510 - AT - Income Tax

Assessment u/s 153C - Addition on account of search conducted on assessee under the Income Tax Act - Assessee had in the regular returns admitted income only from the jewellery business. Nothing regarding his money lending business was ever disclosed - In his statement given after the search, assessee admitted that he was running a financing business since three decades. He never cared to show the existence of such business or income therefrom in the regular returns filed. Even for the jewellery business, income returned was negligible, when compared to the actual turnover and this can clearly be discerned from surplus stock found at the time of search Held that - Clearly established that assessee was having Sahukhari Byaj business and was also earning substantial interest therefrom. Admission of the assessee regarding such interest income could, therefore, be extrapolated to various years other than the years for which the books were found, because, even in respect of assessments done pursuant to search, rules of preponderance of probability will apply. What is specifically noted is that these assessments were done under Section 153C read with Section 143(3) of the Act - The Assessing Officer was not constrained by the fetters of evidence found at the time of search alone. Assessment under Section 153C/153A cannot be treated on par with block assessments done under Chapter XIVB of the Act. Contents of the books found at the time of search, has to be considered as true by virtue of Section 132(4A) of the Act, though it is a rebuttable presumption. Admittedly, nothing was seized which would show that opening balance as on 8.11.99 was the income of the assessee for assessment year 2000-01. Considering these aspects, addition made for investment in Sahukhari Byaj business for assessment year 2000-01 was not warranted and rightly deleted by the CIT(Appeals). However, the additions made by the Assessing Officer for interest earned by the assessee in such business for various years were, unjustly deleted by ld. CIT(Appeals). Such additions are reinstated. Order of the CIT(Appeals) to this extent is set aside. In regard to the addition to be made in the jewellary business, there were more than sufficient evidence found at the time of search to show that assessee was having substantial gold and silver jewellery business in addition to what was returned by him in his regular returns. Admittedly, there was a surplus stock of more than Rs. 95 lakhs found at the time of search. Admission of the assessee in the statement recorded on 29.5.2005 has to be seen in the light of such excess stock found at the time of search. Assessee might have retracted the statement at a later date. Nevertheless, such retraction without any corroborative evidence will have no value whatsoever - Hon ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. 1971 (9) TMI 64 - SUPREME Court has clearly held that an admission was an extremely important piece of evidence though not conclusive. Here, the assessee was unable to establish that admission made by him at the time of search was not correct. Even if there was retraction, it was only a hollow one - In the result, confirmed the orders of CIT(Appeals) insofar as it relate to deletion of additions made for investment in Sahukhari Byaj business and excess stock in gold and jewellery business. However, set aside his orders in relation to addition made for interest in Sahukhari Byaj business and income from jewellery business. - Decided partly in favor of revenue.

Summary

Issues Involved:
1. Addition for investment in Sahukhari Byaj business.
2. Addition for undisclosed income from jewellery business.
3. Addition for unaccounted interest on Sahukhari Byaj business.
4. Addition for excess stock in gold jewellery business.

Detailed Analysis:

1. Addition for Investment in Sahukhari Byaj Business:
The assessee, engaged in jewellery and money lending, was subjected to a search, leading to the discovery of substantial investments in the Sahukhari Byaj business. The Assessing Officer (A.O.) determined an unexplained investment of Rs. 74,45,523 for assessment year 2000-01 based on the debtors' balance as of 8.11.99. The assessee argued that this balance was an opening balance and not an investment for the year 2000-01. The CIT(Appeals) accepted the assessee's contention, noting that the amount represented an opening balance and no evidence was found during the search to prove it was an investment for the relevant year. The Tribunal upheld the CIT(Appeals) decision, confirming that the addition for investment in Sahukhari Byaj business for assessment year 2000-01 was unwarranted.

2. Addition for Undisclosed Income from Jewellery Business:
The A.O. made additions based on the assessee's statement and the substantial surplus stock found during the search, estimating suppressed income from jewellery business. The CIT(Appeals) deleted these additions, stating they were solely based on the assessee's retracted statement and not on any search materials. However, the Tribunal found that the A.O. was justified in estimating the income from jewellery business due to the significant turnover and surplus stock discovered. The Tribunal reinstated the additions made by the A.O. but directed the A.O. to exclude the income declared in the regular returns for assessment years 2000-01 and 2001-02.

3. Addition for Unaccounted Interest on Sahukhari Byaj Business:
The A.O. added interest income based on the assessee's statement that he earned substantial interest from the Sahukhari Byaj business. The CIT(Appeals) deleted these additions, arguing they were based on the retracted statement and not on seized documents. The Tribunal, however, reinstated the A.O.'s additions, noting that the assessee's admission of earning significant interest was corroborated by the books found during the search and the rules of preponderance of probability.

4. Addition for Excess Stock in Gold Jewellery Business:
The A.O. made an addition for unexplained stock in jewellery business for assessment year 2005-06, although the assessee had admitted the value of such stock in his return for assessment year 2006-07. The CIT(Appeals) deleted this addition, stating the excess stock should be considered for the year of search, i.e., assessment year 2006-07. The Tribunal upheld the CIT(Appeals) decision, confirming that the excess stock was assessable only for assessment year 2006-07 and directing the A.O. to ensure it was included in the income for that year.

Conclusion:
The Tribunal confirmed the CIT(Appeals) orders on the deletion of additions for investment in Sahukhari Byaj business and excess stock in gold jewellery business. However, it reinstated the A.O.'s additions for interest income from Sahukhari Byaj business and income from jewellery business, with a directive to exclude the income declared in regular returns for assessment years 2000-01 and 2001-02. Appeals for assessment years 2000-01 and 2005-06 were partly allowed, while appeals for assessment years 2001-02 to 2004-05 were allowed.