2008 (12) TMI 75 - HC - Income Tax

Search operation was conducted & certain documents were seized - During block assessment inference of income from commission agency for sale and purchase of vehicles was sought to be drawn - Block assessment made on basis of inferences drawn was upheld by CIT - CIT partly allowed the appeal of the assessee which was also upheld by tribunal - findings recorded by the Tribunal are findings of facts based on appreciation of evidence- No question of law arises revenue s appeal is dismissed

Summary

Issues Involved:

1. Existence of commission agency prior to A.Y. 1997-98.
2. Relief of Rs.10,02,250/- based on non-confrontation of a document during search.
3. Relief of Rs.33,80,000/- based on the statement recorded under section 132(1).
4. Deletion of addition of Rs.14,00,000/- based on seized document.
5. Granting relief by recording a perverse finding.
6. Legal sustainability of findings in view of admissions made during assessment proceedings.

Detailed Analysis:

1. Existence of Commission Agency Prior to A.Y. 1997-98:

The Tribunal held that the documents dated 22.05.1993 found during the search operation did not contain any mention of the assessee nor their relevance to the assessee. The Tribunal found that the notations of the amounts and names in the seized document did not carry any description of the nature of the transaction as made out by the Revenue. The Tribunal concluded that without clear evidence linking the document to the assessee, the inference of a commission agency prior to A.Y. 1997-98 could not be sustained.

2. Relief of Rs.10,02,250/- Based on Non-Confrontation of Document:

The Tribunal allowed relief to the assessee on the ground that the document dated 22.05.1993, which was seized during the search, was not confronted to the assessee during the search operation. It was only during the assessment proceedings that the document was brought to the assessee's attention. The Tribunal found that this procedural lapse warranted relief.

3. Relief of Rs.33,80,000/- Based on Statement Recorded Under Section 132(1):

The Tribunal noted that the assessee explained the amounts totaling Rs.33,80,000 as payments due from various dealers, which were to be made to customers who sold vehicles. The Tribunal found that the explanation was plausible, as the document did not by itself indicate that the amounts were undisclosed investments. The Tribunal emphasized that the Assessing Officer's inference that the assessee bought and sold vehicles on his own account was not supported by any material evidence.

4. Deletion of Addition of Rs.14,00,000/- Based on Seized Document:

The Tribunal found that the inference drawn by the Assessing Officer regarding an investment in a flour mill was not based on any corroborative material. The Tribunal accepted the assessee's explanation that the amount related to his business interest in the partnership firm M/s Johri Mill, Samana. The Tribunal directed the Assessing Officer to allow the assessee an opportunity to explain the nature of the noting and whether it was properly accounted for in the firm's records.

5. Granting Relief by Recording a Perverse Finding:

The Tribunal's findings were based on the appreciation of evidence and explanations provided by the assessee. The Tribunal found that the Assessing Officer's inferences were not supported by material evidence and that the explanations provided by the assessee were plausible and credible.

6. Legal Sustainability of Findings in View of Admissions Made During Assessment Proceedings:

The Tribunal held that the findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal were based on the evidence and explanations provided by the assessee. The Tribunal noted that the search did not uncover any material evidence proving that the household expenses declared by the assessee were understated. The Tribunal also addressed the issue of unexplained investment in the construction of the house, finding that the addition made by the Assessing Officer was not sustainable based on the evidence.

Conclusion:

The High Court dismissed the appeal, stating that the findings recorded by the Tribunal were findings of fact based on the appreciation of evidence, and no substantial question of law arose. The appeal was dismissed.