2014 (10) TMI 221 - AT - Income Tax

Addition made on adhoc basis - Nature of payment ignored Undisclosed income - Held that - There was search and seizure operation under Section 132 of the Act in the case of Capital Meter group - The assessee is a director and CEO of Capital Power Systems Ltd., one of the companies in Capital Meter group - the income in the individual capacity of Shri Pawan Kumar Bansal is disclosed for the first time by the statement dated 12th September, 2006 - In this statement also, he does not say that the income of ₹ 3,55,00,000/- is the income of AY 2007-08 but says that it is the additional income of different years during the block period - the cumulative effect of the letter dated 1.9.2006 and statements dated 8.9.2006 and 12.9.2006 is to be seen and whether as per the cumulative effect of all the above three documents can it be said that the undisclosed income of ₹ 7 crores is required to be assessed in the hands of the assessee i.e. Shri Pawan Kumar Bansal for AY 2007-08 - it cannot be said that the income is liable to be assessed in the hands of the assessee for the AY - CIT(A) adopted the right course of action i.e., to determine the undisclosed income on the basis of loose papers found and seized from the assessee s premises - CIT(A) to the extent wherein he held that the income of the assessee i.e. Shri Pawan Kumar Bansal is to be determined on the basis of undisclosed income as per the noting on the loose papers Decided against revenue. Income determined on the basis of loose papers Held that - The entry relates to some transaction dated 24th December, 2003 - the transaction cannot be said to be pertaining to the accounting year relevant to the AY under consideration - the only addition which can be sustained on the basis of loose papers found and seized during the course of search is ₹ 7,90,000 - the addition of ₹ 7,90,000/- in the case of the assessee i.e. Shri Pawan Kumar Bansal is upheld Decided partly in favour of assessee.

Issues Involved:
1. Addition of Rs. 27.58 lakhs based on loose papers.
2. Deletion of Rs. 3,07,00,000/- on account of undisclosed income.
3. Deletion of Rs. 3,45,00,000/- made on a protective basis in the hands of the assessee.
4. Assessment of undisclosed income based on statements and documents.

Issue-wise Detailed Analysis:

1. Addition of Rs. 27.58 lakhs based on loose papers:
The assessee argued that the Rs. 27.58 lakhs addition was based on loose papers (Annexures A-6 and 16) with no clear indication of the nature of payment or relation to the appellant. The dates of payments mentioned were from AY 2006-07, making the addition for AY 2007-08 illegal. The Tribunal found that pages 80, 81, and 82 did not belong to the year under appeal and directed the deletion of the addition based on these pages. However, the addition of Rs. 7,90,000/- from page 77 was sustained due to the lack of explanation regarding the transactions.

2. Deletion of Rs. 3,07,00,000/- on account of undisclosed income:
The Revenue's appeal included a ground regarding the deletion of Rs. 3,07,00,000/- on account of undisclosed income admitted by the assessee. However, the Tribunal noted that no such addition was made by the Assessing Officer in the case of the assessee, making this ground misconceived and thus rejected.

3. Deletion of Rs. 3,45,00,000/- made on a protective basis in the hands of the assessee:
The Tribunal examined the cumulative effect of the letter dated 1st September 2006 and the statements dated 8th and 12th September 2006. It concluded that the undisclosed income of Rs. 7 crores was not liable to be assessed in the hands of the assessee for the year under appeal. The Tribunal upheld the CIT(A)'s decision to determine the undisclosed income based on loose papers found during the search. Since no statement or loose paper was found from Shri Mahesh Kumar Gupta's premises, the addition of Rs. 3,45,00,000/- made on a protective basis in the hands of the assessee was deleted.

4. Assessment of undisclosed income based on statements and documents:
The Tribunal noted that the original disclosure of Rs. 7 crores was made by Capital Power Systems Ltd., not by the assessee in his individual capacity. The statements recorded on 8th and 12th September 2006 reiterated the disclosure on behalf of the Capital Group of companies. The Tribunal emphasized that a statement must be considered as a whole, and the Revenue cannot rely on only one part of the statement. The Tribunal found that the proper course was to determine the undisclosed income based on the loose papers found during the search, which the CIT(A) did.

Conclusion:
The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeal, sustaining the addition of Rs. 7,90,000/- based on the transactions recorded at page 77 of Annexure A-6 and deleting the rest of the additions. The Tribunal upheld the CIT(A)'s approach in determining the undisclosed income based on the loose papers found during the search.

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