2012 (8) TMI 1170 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the validity of proceedings initiated u/s 158BD of the I.T. Act, estimation of undisclosed investments, and the application of additional gross profit rate.

Validity of Proceedings u/s 158BD:
The appeal challenged the validity of the proceedings initiated u/s 158BD of the I.T. Act. The CIT(A) upheld the validity of the proceedings, which was contested by the appellant. However, during the hearing, the AR representing the assessee conceded that grounds 1 to 3 were not pressed, leading to their dismissal.

Estimation of Undisclosed Investments:
The AO estimated undisclosed investments at Rs. 10,44,491 on the assessee u/s 158BD. The CIT(A) acknowledged that since sales were not suspected, corresponding purchases were entered in the books, albeit not in the name of the vendor. The CIT(A) estimated the undisclosed investments at Rs. 2,61,627, being 25% of the amount held as undisclosed by the AO, and added 5% of GP on the same. The AR argued that the additions could not be sustained as they pertained to transactions recorded in the regular books of account, citing relevant judgments.

Application of Additional Gross Profit Rate:
The DR supported the revenue authority's order, stating that the assessee was a beneficiary of hawala transactions, leading to the initiation of proceedings u/s 158BD. The AO added back the aggregate of such entries as bogus investments. The CIT(A) reduced the disallowance from Rs. 10,46,490 to Rs. 2,61,627 and added 5% of GP on the initial amount. The ITAT considered the arguments and upheld the addition of Rs. 52,325 as additional gross profit, while ordering the deletion of the investment addition of Rs. 2,61,627.

Conclusion:
The ITAT partially allowed the appeal filed by the assessee, emphasizing the deletion of the investment addition and sustaining the additional gross profit addition. The judgment highlighted the importance of assessing transactions recorded in the books of account and the application of relevant provisions under Chapter XIVB of the I.T. Act.