2013 (10) TMI 1576 - AT - Income Tax

Summary

Issues Involved:

1. Whether the unaccounted business of money lending and finance should be assessed in the case of the Association of Persons (AOP) or the appellant firm.
2. Whether the status of AOP was valid without obtaining a Permanent Account Number (PAN) and filing returns.
3. Whether the business conducted by the appellant firm along with other persons should be taxed as AOP.
4. The correctness of the telescoping of additions and incremental peak credit computation.
5. The validity of penalty levied u/s 271(1)(c) of the IT Act.

Summary:

1. Unaccounted Business Assessment:
The assessee contended that the unaccounted business of money lending and finance should be assessed in the case of AOP and not the appellant firm. The AO rejected this plea, noting the absence of PAN and evidence of AOP formation. The CIT(A) upheld the AO's decision, stating that the status claimed in the return of income must be followed, and the assessee had declared its status as a partnership firm. The Tribunal agreed, finding no evidence of AOP's existence and confirming the assessment in the status of the firm.

2. Status of AOP Without PAN:
The assessee argued that the AOP's lack of PAN was due to the business being carried outside the books. The AO and CIT(A) rejected this, emphasizing that the status must be claimed in the return of income, and the assessee had not done so. The Tribunal upheld this view, noting the absence of any documentary evidence supporting the AOP's existence.

3. Business Conducted by Appellant Firm:
The assessee claimed that the business was conducted by a group of persons forming an AOP. The AO and CIT(A) found no evidence supporting this claim, and the Tribunal agreed, stating that the business was carried out by the firm, not an AOP. The Tribunal emphasized that the assessee failed to provide any corroborative evidence of the AOP's formation or existence.

4. Telescoping of Additions and Incremental Peak Credit:
The CIT(A) directed the AO to verify the additions from the seized material and allow telescoping of income. The Tribunal supported this approach, stating that the cash flow statement prepared from the seized material must be considered. The Tribunal directed the AO to compute the incremental peak credit and assess the net undisclosed income accordingly.

5. Penalty u/s 271(1)(c):
The CIT(A) upheld the penalty levied u/s 271(1)(c) based on the incriminating documents found during the search. The Tribunal, however, restored the quantum appeals to the AO for re-adjudication, directing that the penalty be decided afresh along with the assessment order.

Conclusion:
The Tribunal dismissed the assessee's appeal to assess the income in the status of AOP and upheld the assessment in the status of the firm. The appeals related to the telescoping of additions and incremental peak credit were allowed for statistical purposes, directing the AO to re-compute the undisclosed income. The penalty appeals were also allowed for statistical purposes, to be reconsidered along with the assessment order.