2015 (10) TMI 2379 - HC - Income Tax

Addition u/s 69 - Whether ITAT has erred in not appreciating that once the entries appearing on any seized document in the course of search are credible and shows that outstanding liability of the assessee amounting to ₹ 1,28,89,362/- was in respect of an investment and by virtue of section 69 of the Act should have been treated as income and could not have been restricted to part payment? - Held that - CIT(A) restricted the addition of ₹ 59,43,115/- as against the addition of ₹ 1,28,69,362/- made by the Assessing Officer as the said amount depicted the payments actually made to Mr. Monga. The amount paid to Mr. Monga was to the tune to ₹ 46,43,115/- and the balance was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated 10.08.2008. A sum of ₹ 13,00,000/- as mentioned in the said letter was also received by him. In totality thus the total payments made by the assessee to Mr. Monga were of ₹ 46,43,115/- ₹ 13,00,000/- and the addition had been restricted to ₹ 59,43,115/-. The Assessing Officer had erred in making addition of ₹ 1,28,69,362/- to the income of the assessee. The balance amount payable by the assessee to Shri Monga and his family members which was shown in the books of account of the assessee as outstanding could not be termed as undisclosed income and included in the total income of the assessee. The CIT(A) and the Tribunal were right in sustaining the addition of ₹ 59,43,115/- in the hands of the assessee for the assessment year 2009-10. - Decided against revenue.

Summary

Issues:
Delay in re-filing appeal, Interpretation of Section 260A of the Income Tax Act, 1961, Treatment of outstanding liability as income under Section 69 of the Act.

Analysis:
1. The judgment addressed the delay of 53 days in re-filing the appeal, which was condoned by the court.
2. The appeal was filed by the revenue under Section 260A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal regarding the treatment of outstanding liability as income under Section 69 of the Act for the assessment year 2009-10.
3. The facts of the case involved a search operation under Section 132(1) of the Act, where the Assessing Officer added an amount to the taxable income of the assessee under Section 69. The Commissioner of Income Tax (Appeals) partly allowed the appeal, restricting the addition made by the Assessing Officer. Both the assessee and the revenue then filed appeals before the Tribunal.
4. The revenue contended that the outstanding liability of the assessee should be treated as income and not restricted to part payment, based on seized documents found from the premises of the assessee.
5. The court, after hearing the arguments, found no merit in the appeal. The CIT(A) had partially accepted the assessee's contention and restricted the addition based on the payments made by the assessee to Mr. Monga. The court quoted relevant findings from the order to support its decision.
6. The Tribunal, in its decision, analyzed the seized documents and transactions between the assessee and Mr. Monga. Despite discrepancies in accounting and failure to produce Mr. Monga during assessment proceedings, the Tribunal upheld the restriction of the addition to the income of the assessee.
7. The court affirmed the decisions of the CIT(A) and the Tribunal, stating that the balance amount payable by the assessee to Mr. Monga and his family members could not be considered undisclosed income. The addition was rightly restricted to the payments made by the assessee, leading to the dismissal of the appeal.
8. Considering the concurrent findings of fact by the CIT(A) and the Tribunal, the court concluded that no substantial question of law arose in the appeal, resulting in its dismissal.