2012 (11) TMI 1284 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of investment made outside books of account.
2. Deletion of addition on account of interest earned on money advanced outside the books of account.
3. Ownership and profit allocation of M/s. Mount Fragrances.
4. Clubbing of unaccounted income and allowing adjustment of excess surrender.

Summary:

Issue 1: Deletion of Addition on Account of Investment Made Outside Books of Account

The revenue appealed against the deletion of an addition of Rs. 1.04 crore made by the Assessing Officer (A.O.) u/s 69 of the Income-tax Act, 1961, as undisclosed investment. This addition was based on entries in a diary found during a search at Shri Brij Mohan Gupta's premises. The CIT(A) deleted the addition, stating that the revenue could not collect sufficient evidence and the diary entries did not conclusively prove the assessee's involvement. The ITAT upheld the CIT(A)'s decision, citing similar cases where such additions were deleted due to lack of concrete evidence.

Issue 2: Deletion of Addition on Account of Interest Earned on Money Advanced Outside the Books of Account

The A.O. had also made an addition of Rs. 65,446 as estimated interest income on the undisclosed investment. The CIT(A) deleted this addition on the same grounds of insufficient evidence. The ITAT confirmed the CIT(A)'s order, noting that the revenue failed to establish a direct link between the diary entries and the assessee.

Issue 3: Ownership and Profit Allocation of M/s. Mount Fragrances

The revenue challenged the deletion of an addition of Rs. 21,06,777, arguing that the assessee was the benami owner of M/s. Mount Fragrances. The CIT(A) had held that the assessee was only 75% owner based on various evidences, including sales-tax registration and import/export code. The ITAT upheld the CIT(A)'s decision, noting that the revenue had accepted similar findings in previous assessment years and had not provided sufficient evidence to prove 100% ownership.

Issue 4: Clubbing of Unaccounted Income and Allowing Adjustment of Excess Surrender

The revenue also contested the CIT(A)'s decision to allow the adjustment of excess surrender of Rs. 19 lakhs against unaccounted income. The CIT(A) had granted this benefit after examining the details of surrendered income and unrecorded sales. The ITAT found no error in the CIT(A)'s order, stating that the adjustment was justified and only telescoping benefit was granted.

Conclusion:

Both appeals by the revenue were dismissed, and the decisions of the CIT(A) were upheld by the ITAT, confirming the deletions and adjustments made in favor of the assessee.

Decision pronounced in the open court on 23.11.2012.