2015 (7) TMI 571 - HC - Income Tax

Unaccounted transaction - AO made the addition on this issue on the basis of loose papers found during course of the search which are not included in the documents BS-1 to BS-8 - ITAT deleted the addition - Held that - the assessee made detailed submission before the ld. CIT(A) noted above explaining each and every loose paper which are found recorded in BS-1 to BS-8. The papers and tabulations of the assessee were forwarded to the AO for his comments in which AO has not pointed out any mistake. The ld CIT(A) also verified the facts himself and gave a categorical finding that most of the transactions on documents/loose papers discussed by the AO in para 10 of the assessment order are found recorded in the documents BS-1 to BS-8. The assessee himself admitted few transactions not entered into BS-1 to BS-8. Working of the same is also given and the basis of the same. No justification to interfere in the order of the ld. CIT(A) as regards the transaction entered into the documents BS-1 to BS-8. It is settled law that in the block assessment, addition could be made on the basis of evidence recorded and found during course of the search. The submission of the ld. DR shows that even if some loose papers are recovered during course of the search, the computation of undisclosed income should be computed for whole of the block period. Such a submission itself would prove and support the findings of the fact recorded by ld. CIT(A) that there is no basis whatsoever in making huge addition against the assessee. No material is also found during course of the search if assessee made any investment in making those unrecorded sales. If the sales are there, there are bound to be purchases. The income however could be computed on the basis of unrecorded sales made outside the books of account for which evidence is recovered. The ld. CIT(A) on going through the submission of the assessee and material on record noted that the transactions relating to the sale of gold ornaments weighing 1587.472 grams and unrecorded sales of ₹ 60,790/- are not recorded in the books of account as well as in BS-1 to BS-8. The ld. CIT(A) took the value of the same as 6,98,488 and applied n.p rate of 13% and make the addition of ₹ 90,903/- and further addition of ₹ 34,000/- being investment in the aforesaid sales. We have applied n.p rate of 3% in the case of the assessee being wholesale dealer. The same rate is applicable on this issue also therefore for unrecorded sale of gold ornaments, the entire sale receipts cannot be profit of the assessee. On both the figures of ₹ 6,98,488/- and ₹ 60,970/- as is confirmed by ld. CIT(A), if n.p rate of 3% is applied, it would give approximate profit of ₹ 21,000/- ₹ 1830/- (Rs,22,830/-). Since no evidence of undisclosed investment is found, the addition of ₹ 34,000/- is deleted. We accordingly set aside the orders of the authorities below to the above extent and direct the authorities below to take the profit on undisclosed sales at ₹ 22,830/- as against ₹ 1,85,593/- sustained by the ld. CIT(A) - Decided in favour of assessee.

Summary

Issues:
- Appeal under section 260-A of the Income Tax Act against orders of the Income Tax Appellate Tribunal and Commissioner (Appeals).
- Deletion of addition of undisclosed income based on unaccounted transactions recorded in seized documents.
- Reduction of peak investment amount by appellate authorities.
- Discrepancies in addition made by Assessing Officer and relief granted by appellate authorities.
- Detailed analysis of transactions and documents by appellate tribunal.
- Justification for not interfering with the findings of the lower authorities.

Analysis:
1. The appeal before the High Court involved challenging the orders of the Income Tax Appellate Tribunal and Commissioner (Appeals) under section 260-A of the Income Tax Act. The case pertained to a search and seizure action on the premises of the assessee dealing with jewelries for the block period from 1.4.96 to 1.8.2002, resulting in assessment of undisclosed income at &8377; 20 Lacs and total income at &8377; 7,88,08,743/-.

2. The main issue raised in the appeal was the deletion of an addition of &8377; 1,04,14,407/- by the appellate authorities based on unaccounted transactions recorded in seized documents BS-1 to BS-8. The appellant argued that the interference by the appellate authorities was unsustainable without considering all aspects of the matter, as analyzed by the Assessing Officer.

3. The appellate tribunal, in its detailed analysis, found discrepancies in the addition made by the Assessing Officer and the relief granted by the Commissioner (Appeals). The tribunal considered the nature of business transactions and unrecorded turnover reflected in documents BS-1 to BS-8, leading to a reduction in the peak investment amount from &8377; 4,56,80,360/- to &8377; 30,00,000/-, providing relief to the appellant.

4. Further scrutiny by the appellate tribunal revealed that most transactions on loose papers found during the search were recorded in documents BS-1 to BS-8. The tribunal emphasized that in block assessments, additions should be based on evidence found during the search period. The tribunal dismissed the revenue's contention for a substantial addition against the assessee, citing lack of material to support such claims.

5. The concurrent findings of fact by the lower authorities were deemed to be based on a thorough evaluation of available material and documents. The High Court concluded that the discretion exercised by the authorities was not perverse or illegal, warranting no interference in the matter. Therefore, the appeal was dismissed based on the lack of grounds for intervention.

This detailed analysis of the judgment highlights the key issues addressed by the High Court in the appeal under section 260-A of the Income Tax Act, providing a comprehensive overview of the legal reasoning and conclusions drawn by the court.