2014 (12) TMI 512 - AT - Income Tax

Revision u/s 263 - Additions made by AO Addition made without proper justification - Enquiries, examinations and verifications were made by the AO or not - Held that - There is no basis for the AO to treat the amount credited in the bank account of Sh. Ashok Kumar as the benami transaction - as per the seized documents it is clearly established that the sum credited in the bank account of Sh. Ashok Kumar pertains to assessee s firm, but the AO has not at all deal with the nature of the seized material and what was the content thereof - CIT(A) has given a finding that, how Sh. Ashok Kumar has been treated as the benami of the assessee is neither coming out from the order of the AO nor from the assessment records examined by CIT(A) - there is no infirmity in the order of the CIT(A) in this regard. The submissions do not serve any purpose as neither in the order of the CIT u/s. 263 nor in the assessment order any material is there to show that the sum credited in the bank account of Sh. Ashok Kumar was the benami transaction of the assessee firm - CIT(A) has every right to adjudicate upon the order of the AO appealed before him judiciously thus, the order of the CIT(A) is upheld - the addition was based on surmises and conjectures and was not at all supported by the evidences or the material on record - AO s order does not cogently prove that addition of ₹ 6,40,896/- is warranted for amount of unexplained stock. Also, AO has made the addition by estimating the net profit @ 10% on the basis of figures of sales culled out by him at ₹ 1,00,71,689 - CIT(A) has examined the addition and estimation of sales by the AO after duly elaborating upon the issues - CIT(A) has given a finding that the estimate of sales as computed by the AO is not supported by cogent basis - CIT(A) has finally computed the total sales figures of the assessee at the figures of ₹ 35,79,069 - CIT(A) rightly has applied 5% rate of profit thus, the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Addition of Rs. 8,56,931/- as benami income.
2. Deletion of addition of Rs. 6,40,896/- for unexplained stock.
3. Deletion of addition of Rs. 8,28,216/- for undisclosed sales.

Issue-Wise Analysis:

1. Addition of Rs. 8,56,931/- as benami income:
The original assessment included an amount credited to the bank account of Mr. Ashok Kumar, alleged to be a benami of the assessee. The AO added Rs. 8,56,931/- to the assessee's income based on seized documents. The CIT(A) found no basis for treating Ashok Kumar as a benami of the assessee, noting that neither the AO's order nor the assessment records provided any justification for this conclusion. The Tribunal agreed with the CIT(A), emphasizing that the AO failed to explain the nature of the seized documents and their content. The Tribunal held that the CIT(A) was correct in deleting the addition, as there was no evidence supporting the AO's claim.

2. Deletion of addition of Rs. 6,40,896/- for unexplained stock:
The AO added Rs. 6,40,896/- to the assessee's income, claiming it represented unexplained closing stock based on figures of purchase, sales, furniture, and cash in hand. The CIT(A) found the AO's calculations speculative and unsupported by evidence. Specifically, the CIT(A) noted discrepancies in the AO's assumptions about purchases, cash in hand, and furniture costs. The Tribunal upheld the CIT(A)'s findings, agreeing that the AO's addition was based on conjecture and not substantiated by concrete evidence.

3. Deletion of addition of Rs. 8,28,216/- for undisclosed sales:
The AO estimated the assessee's total sales at Rs. 1,00,71,689/- and applied a 10% profit rate, resulting in an addition of Rs. 8,28,216/-. The CIT(A) reduced the sales estimate to Rs. 35,79,069/- based on actual seized documents and applied a 5% profit rate as per Section 44AF, resulting in a profit of Rs. 1,78,953/-. The Tribunal agreed with the CIT(A), noting that the AO's sales estimation was not based on solid evidence and that the CIT(A)'s method of calculating sales and profit was more reasonable and supported by the material on record.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the additions made by the AO. The Tribunal found that the AO's additions were speculative and not supported by sufficient evidence, while the CIT(A)'s conclusions were based on a thorough examination of the records and applicable legal provisions. The Tribunal's decision underscores the importance of basing tax assessments on concrete evidence rather than conjecture.