2014 (6) TMI 537 - AT - Income Tax

Addition towards suppression of income Held that - The AO has proceeded to determine the suppressed gross profit and accordingly proceeded to estimate the addition of Rs. 65.00 lakhs on the basis of materials, which were agreed to be correct by the partners of the assessee-firm - CIT(A) has proceeded to determine the income independently on some other basis, i.e., the CIT(A) did not examine the method adopted by the AO for determining the suppressed income, but directed the AO to estimate the income by adopting the net profit rate of 15% - CIT(A) has ignored the impounded materials - the assessee has failed to furnish any material to controvert the findings of the AO to support the decision taken by the CIT(A) thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for adjudication Decided in favour of Revenue.

Summary

Issues:
1. Appeal against partial relief granted to the assessee for suppression of income.

Analysis:
The appeal before the Appellate Tribunal ITAT Cochin concerned the revenue's challenge against the decision of the Ld. CIT(A) to grant partial relief to the assessee regarding the addition made for suppression of income in the assessment year 2009-10. The assessee, a partnership firm operating a bar hotel, had agreed to offer additional income during a survey operation conducted by the Department. However, discrepancies arose in the income declared by the assessee in the returns filed, leading to a dispute with the Assessing officer. The Assessing officer estimated suppressed income based on sales figures and gross profit calculations, resulting in a significant difference between the declared and estimated income.

The Assessing officer's estimation of suppressed income was contested by the assessee, arguing that certain expenses were omitted in the accounts, and the gross profit rate declared was fair and reasonable. The Ld. CIT(A) sought a remand report from the Assessing officer, who maintained his stance on the addition made. The Ld. CIT(A) found the addition to be on the higher side and directed the Assessing officer to determine the income by applying a net profit rate of 15% of sales, differing from the method used by the Assessing officer. The revenue, dissatisfied with this decision, appealed to the Tribunal.

Upon review, the Tribunal noted the Assessing officer's reliance on impounded materials and the agreement of the partners on the correctness of the sales figures. The Tribunal observed that the Ld. CIT(A) had disregarded the impounded materials and directed a different approach for estimating income. The Tribunal found that the assessee failed to provide evidence to challenge the Assessing officer's findings, leading to the reversal of the Ld. CIT(A)'s decision and the restoration of the Assessing officer's order.

In conclusion, the Tribunal allowed the appeal filed by the revenue, emphasizing the importance of supporting evidence in challenging income estimation decisions and upholding the Assessing officer's determination in the absence of contrary material.

This detailed analysis highlights the key aspects of the judgment, including the assessment of suppressed income, the role of impounded materials, the differing approaches of the Assessing officer and Ld. CIT(A), and the Tribunal's decision based on the evidence presented.