2014 (4) TMI 533 - AT - Income Tax

Rejection of books of accounts Bogus accommodation entries - Held that - In the search and on the basis of material recovered and statements obtained it has been duly established that assessee was indulging in bogus accommodation entries - No actual sale and purchase was done by the assessee - Proper books of accounts were not maintained thus, there is no infirmity in the orders of the authorities in which the books of accounts have been rejected Decided against Assessee. Estimation of income on accommodation sale bill/turnover Held that - The assessee is indulging in bogus accommodation entry business and no actual sale and purchase activity has been done - The books has also been rejected and it has been noted that proper books are not maintained - a reasonable estimates @2% of investment has been made by the AO, which cannot be faulted with though the AO has written that addition was made on the basis accommodation fresh investment ; the method of computation of the amount of investment is not on record thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Treatment of income u/s 69 of the Act Held that - The nature of seized documents has not been brought on record by the AO or the CIT(A) - No details has been submitted by means of paper book - Nothing is on record to suggest that the brokers were examined or the assessee was asked to produce them - the purchases have been duly registered at the circle rate specified - No addition can be made on the basis of observation of the AO that element of payment outside the books of accounts over and above the sale deed is a normal feature in property transaction Relying upon K.P. Verghese vs. Income Tax Officer, Erankulam 1981 (9) TMI 1 - SUPREME Court - the burden of proving is that of Revenue when there is allegation of understatement on concealment in the consideration - no addition can be made in this regard on the basis of dumb documents - the matter is required to be remitted back to the AO for fresh adjudication. Confirmation of addition amount to sale on protective basis Held that - The statement /affidavit of the assessee after two months of the search was an afterthought and was not backed by necessary evidences about genuine and non-genuine business - During the appellate proceedings the assessee had not been able to counter any of the findings of the authorities below with suitable evidence - the addition has been made only on protective basis Relying upon Lalji Haridas v. ITO 1961 (7) TMI 8 - SUPREME Court thus, there is no infirmity in the order of the CIT(A) Decided against Assessee.

Summary

Issues Involved:
1. Delay in filing the appeals.
2. Rejection of books of accounts.
3. Estimation of income on accommodation sale bills/turnover.
4. Estimation of income on accommodation fresh investments.
5. Treatment of Rs. 68,80,622/- as income under Section 69 of the Income Tax Act.
6. Addition of Rs. 84,00,000/- on a protective basis.

Detailed Analysis:

1. Delay in Filing the Appeals:
At the outset, there was a delay of 43 days in filing the appeals before the Tribunal. The reasonable cause for the delay was the critical illness and subsequent death of the Director's father, which preoccupied the Director with the associated rites. After hearing both counsels and reviewing the records, the Tribunal condoned the delay and admitted the appeals.

2. Rejection of Books of Accounts:
The assessee's books of accounts were rejected based on evidence obtained during a search and seizure operation, which indicated that the assessee was involved in providing bogus accommodation entries and not conducting genuine business. The Ld. Counsel for the assessee did not vehemently press this issue. The Tribunal found no infirmity in the authorities' decision to reject the books of accounts due to the lack of proper maintenance and the bogus nature of the transactions.

3. Estimation of Income on Accommodation Sale Bills/Turnover:
The income from accommodation sale bills/turnover was estimated at 2% based on statements provided by the Director, S.K. Gupta, who admitted to earning a commission of 1.5% to 2% for providing accommodation entries. The Tribunal upheld the 2% estimation but noted that the assessee should be allowed to prove incurred expenditures with cogent material. The issue was remitted to the AO to examine the allowance of expenditure based on materials submitted by the assessee.

4. Estimation of Income on Accommodation Fresh Investments:
The AO estimated the income at 2% on accommodation fresh investments. The assessee argued that the estimate should be based only on initial and fresh investments, not on the rotation of the investment amount. The Tribunal noted that the method of computation for the investment amount was unclear and remitted the issue to the AO to re-examine and arrive at the investment figure on a cogent basis.

5. Treatment of Rs. 68,80,622/- as Income under Section 69:
The AO added Rs. 68,80,622/- as unexplained investment based on seized documents indicating higher payments for land purchases than recorded in the sale deeds. The assessee claimed these documents were pre-negotiation quotations from brokers. The Tribunal found that the nature of the seized documents was not adequately examined, and the brokers were not questioned. The matter was remitted to the AO for a fresh examination of the documents and necessary verification, including confronting the brokers and sellers.

6. Addition of Rs. 84,00,000/- on a Protective Basis:
The AO added Rs. 84,00,000/- on a protective basis, suspecting the sales to Reliance Industries as accommodation entries without corroborative evidence. The assessee's subsequent affidavit claiming actual work done for Reliance was deemed an afterthought. The Tribunal upheld the protective addition, noting the absence of suitable evidence to counter the AO's findings and the legitimacy of protective assessments as recognized by the Supreme Court.

Conclusion:
In conclusion, the Tribunal partly allowed the appeals for statistical purposes, remitting certain issues back to the AO for further examination and verification. The order was pronounced in the open court on 14/2/2014.