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2014 (5) TMI 1183 - AT - Income TaxAssessment u/s 153A - additions over and above declared income u/s. 132(4) based on materials gathered during assessment and other seized materials - HELD THAT - With regard to justification of retraction the stand of the assessee has been manifold. AR has submitted that a mistake in the declaration during search was due to incorrect bank credit summation which is matter of record. According to the learned Authorized Representative in general books prepared by the assessee have not been rejected by cogent reasoning. The main emphasis of the assessee has been that agricultural activity and related income was bonafide one as a source of initial funds. The source of agricultural income ought to have considered the overall quantification of income. The addition has been made on the basis of search statement alone which is not justified. According to AO the disclosure promise during search u/s.132(4) has not been fulfilled. While according to the CIT(A) self serving books are not admitted. The Assessing Officer s verification of books his findings etc. are contrary to his finding of facts on the issue. In this background the stand of the assessee has been that the Assessing Officer s observation as regards the books of accounts mistake of quantification of credits summations etc. are facts. These observations ought to have not been brushed aside by the CIT(A). According to us this approach is not justified. The authorities below should give finding on each and every point while reaching to its conclusion. Return filed based on books of account and income declared was reflected based on cogent reasoning - The main objection of the Assessing Officer has been that there is long gap of 28 months for retracting by way of return while there was no threat or coercion during search - HELD THAT - For A.Y. 2004-05 source of funds for Ghanawat land deal were claimed from agricultural income and gift from relatives. The Assessing Officer has observed that the agricultural income was not sufficient considering Ghanawat land deal hence the said argument was not accepted. While in appeal the CIT(A) in para 13 page 22 observed that considering the lavish life style of assessee the agricultural income of 1.95 lakhs was not sufficient to explain the source of land payment. In this background the stand of the assessee has been that the amount payments recorded in books of accounts agricultural income was bonafide and gifts have not been doubted so the addition in question was not justified. Thus the authorities below have taken contradictory stand while rejecting the stand of assessee. In fact it should be analysed as per fact put forward by the assessee on the point and authorities below should have appreciated the fact before reaching any adverse opinion that too mainly based on admission of assessee. For A.Y. 2005-06 the stand of the assessee has been that the books are made on the basis of bank statement primarily. The very same statement was used as basis for declaration during search. This mistake crept in assessment and appellate stage which could not be cured. According to us the facts on record should not have been ignored to justify addition mainly based on admission. Regarding A.Y. 2007-08 CIT(A) was not justified in rejecting contentions of assessee while upholding the addition made by the Assessing Officer. This aspect needs deep probe into the matter on the issue. With regard to the other addition i.e. 32.50 lakhs received from Mr. Sonigra CIT(A) confirmed the order of Assessing Officer on the point. The stand of the assessee has been that the assessee has not received any cash from Ravet land deal from Sonigra. However the assessee was in receipt of 33 lakhs for another land deal at Shinde Wasti which ultimately did not materialize. The said fact clearly emerged from the statement of Sonigra. These arguments of assessee have not been met out by authorities below. According to us it is not justified. To reach a proper conclusion it needs deep probe into the matter. It is pertinent to mention here that the person from agricultural background is not able to understand and meet out economic complications with income tax angle in fast urbanization. According to us the books of accounts should be rejected only after rejecting the claim of assessee by cogent reasoning because the assessee s contention revolves around bank statement found during the course of search. According to us this whole issue should be looked into in the light of above discussion. So we set aside the order of CIT(A) and restore the whole issue to the file of the Assessing Officer with a direction to decide the same as per fact and law and after providing due opportunity of being heard to the assessee.
Issues Involved:
1. Confirmation of additions made by the Assessing Officer (AO) against the returned income. 2. Validity of additions based on a declaration made during the course of a search, which was later retracted by the assessee. 3. Assessment of investments and expenses as undisclosed income. 4. Non-allowance of deductions claimed for various expenditures. 5. Application of the principle of telescoping for the income declared during the search. 6. Specific issues related to individual assessment years, including the Sonigara land deal and the sale of a Lexus car. Detailed Analysis: Issue 1: Confirmation of Additions by the AO The CIT(A) confirmed the additions made by the AO against the returned income for multiple assessment years. The assessee argued that the additions were wrongly confirmed based solely on a declaration made during the search, which was later retracted. The Tribunal noted that the AO and the CIT(A) did not provide adequate reasoning to reject the books of accounts prepared by the assessee post-search, which reflected a different income than initially declared. Issue 2: Validity of Additions Based on Search Declaration The assessee retracted the declaration made during the search, citing errors and lack of proper understanding of tax laws. The AO and CIT(A) held that the retraction was not valid due to the long gap of 28 months and lack of evidence of coercion. The Tribunal found that the authorities did not adequately consider the books of accounts prepared by the assessee and emphasized that retraction should be rejected based on cogent reasoning, not merely on the timing of the retraction. Issue 3: Assessment of Investments and Expenses The AO assessed various investments and expenses as undisclosed income based on the declaration made during the search. The Tribunal noted that the AO allowed certain expenses found to be genuine but disallowed others without sufficient evidence. The Tribunal emphasized that the AO should have considered the books of accounts and other evidence provided by the assessee before making such additions. Issue 4: Non-Allowance of Deductions The assessee claimed deductions for various expenditures, including land cost and depreciation on cars, which were not allowed by the AO. The Tribunal noted that the AO did not provide sufficient reasoning for disallowing these deductions and directed a re-examination of these claims based on the evidence provided by the assessee. Issue 5: Application of Telescoping Principle The assessee argued for the application of the telescoping principle, which allows for the adjustment of declared income against unexplained investments or expenses. The AO and CIT(A) did not adequately consider this principle. The Tribunal directed the AO to re-examine the application of telescoping in light of the evidence provided. Specific Issues Related to Individual Assessment Years - A.Y. 2004-05: The AO and CIT(A) did not accept the source of funds for the Ghanawat land deal, citing insufficient agricultural income. The Tribunal directed a re-examination of the evidence provided by the assessee. - A.Y. 2005-06 and 2006-07: The assessee argued that the actual bank summations were lower than the declared income. The Tribunal found that the AO and CIT(A) did not adequately consider the evidence provided by the assessee. - A.Y. 2007-08: The Tribunal noted that the AO and CIT(A) did not properly consider the evidence related to receipts and credits, including advances and loans. - A.Y. 2008-09 and 2009-10: The Tribunal directed a re-examination of the evidence related to the sale of a Lexus car and the Sonigara land deal, noting that the AO and CIT(A) did not provide adequate reasoning for their conclusions. Conclusion: The Tribunal set aside the order of the CIT(A) and restored the issues to the file of the AO for a fresh examination based on the principles of natural justice and after providing due opportunity to the assessee. The Tribunal emphasized the need for cogent reasoning and proper consideration of the evidence provided by the assessee in making any additions or disallowances.
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