2011 (8) TMI 1346 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of investment in land as undisclosed income.
2. Treatment of salary and commission of business income as undisclosed income.
3. Treatment of physical cash found during the search as undisclosed income.
4. Treatment of deficit/surplus stock as undisclosed income.
5. Treatment of unaccounted payment to M/s Laxmi Narasimha Pictures.
6. Treatment of unexplained payment made to M/s Jet Speed.

Summary:

1. Treatment of investment in land as undisclosed income:
During the search, evidence suggested an unexplained investment of Rs. 2.5 lakhs in property at D. No. 21-1-854 Rikabgunj, Hyderabad. The Assessee admitted that the investment was not reflected in the books of accounts and requested telescoping against undisclosed sales admitted by other concerns. The Assessing Officer rejected this request, noting that the investment was made in the previous year relevant to assessment year 2001-02 and the income from suppression of sales belonged to other group members. The Tribunal directed the Assessing Officer to telescope the undisclosed investment out of the undisclosed income determined, avoiding double addition. The issue was set aside for fresh consideration and partly allowed.

2. Treatment of salary and commission of business income as undisclosed income:
The Assessee argued that salary and commission income, subject to tax deduction at source, should not be treated as undisclosed income. However, the Tribunal found that no such ground was raised before the CIT(A) or the Tribunal, dismissing the arguments as misplaced.

3. Treatment of physical cash found during the search as undisclosed income:
The Assessing Officer added 50% of the cash found in the Assessee's bedroom, totaling Rs. 3,66,199/-, as undisclosed income. The Assessee's explanation regarding the source of cash was rejected due to inconsistencies and lack of evidence. The Tribunal directed the Assessing Officer to give due credit to the available cash balance in the books of accounts and telescope the unexplained cash out of the undisclosed income determined during the block period. The issue was set aside for reconsideration.

4. Treatment of deficit/surplus stock as undisclosed income:
On physical verification during the search, deficit/surplus stock was found. The Assessee claimed inter-concern transfer of cassettes and CDs, which was rejected by the lower authorities. The Tribunal directed the Assessing Officer to arrive at a cumulative net surplus or deficit stock and treat it as undisclosed income in the respective Assessees' hands. The issue was remitted back for fresh consideration and partly allowed.

5. Treatment of unaccounted payment to M/s Laxmi Narasimha Pictures:
Evidence indicated an unaccounted payment of Rs. 4,50,000/- towards purchase of assignment charges of a Telugu film. The Assessee sought telescoping of this payment against undisclosed sales admitted in other group concerns. The Tribunal directed the Assessing Officer to set off this unexplained expenditure out of undisclosed income during the block period. If no undisclosed income existed, the unexplained expenditure should be treated as undisclosed income separately. The issue was set aside for fresh consideration.

6. Treatment of unexplained payment made to M/s Jet Speed:
The Assessing Officer rejected the Assessee's explanation regarding a payment of Rs. 6,72,180/- to Jet Speed Audio Limited, citing lack of confirmation and proper source explanation. The Tribunal found no force in the Assessee's argument about payments on behalf of other parties but agreed to telescope the payment out of undisclosed income. The issue was set aside for fresh consideration.

Conclusion:
All the appeals of the Assessees were partly allowed for statistical purposes. The order was pronounced in open Court on 11.8.2011.