2016 (8) TMI 768 - HC - Income Tax

Addition u/s.69B - understatement of the cost of imported machinery - Tribunal deleted the addition - Held that - Tribunal has considered the provisions of Section 69B of the Act and has come to the conclusion that the onus is on the revenue to show that the assessee has expanded extra amount i.e. the amount invested by the assessee is more than the amount as recorded in the books of account. The Tribunal has concluded that the revenue has failed to discharge the burden of proof that the assessee has invested US 53,75,000 in the purchase of plant and machinery. We are in complete agreement with the findings of the Tribunal that the revenue has not been able to bring any evidence or material on record which may prove that the assessee has made the payment amounting to ₹ 5,73,000 to the plant and machinery supplier. Payment made by the third party who is not subject to Indian Income Tax Act cannot be regarded to have been made by the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition u/s.69B for understatement of the cost of imported machinery
2. Deletion of deemed income u/s.69B for undisclosed cash payment for factory construction
3. Deletion of deemed income u/s.69B for undisclosed cash expenditure based on seized paper entries
4. Calculation of interest u/s.158GFA(1) from a specific date

Analysis:

Issue 1: Addition u/s.69B for understatement of the cost of imported machinery
The Tribunal allowed the appeal of the assessee by deleting an addition of &8377; 8,82,80,750 confirmed by CIT(A) but dismissed another addition of &8377; 7,50,000. The Assessing Officer had made an addition of &8377; 8,82,18,073 towards unaccounted investment in imported machinery. The Tribunal concluded that the revenue failed to prove that the assessee invested US $ 53,75,000, as the burden of proof lay on the revenue to show the excess investment beyond what was recorded in the books of account. The Tribunal found no evidence that the assessee made the additional payment, and payments made by a non-resident third party cannot be attributed to the assessee under section 69B. Thus, the Tribunal was justified in deleting the addition.

Issue 2: Deletion of deemed income u/s.69B for undisclosed cash payment for factory construction
This issue, along with issues 3 and 4, was remanded to the Assessing Officer for reconsideration. Therefore, no decision was made on these issues as they were kept open for further examination.

Final Decision:
The High Court confirmed the Tribunal's decision to delete the addition u/s.69B for the understatement of the cost of imported machinery. The Court agreed that the revenue failed to provide evidence of the excess investment by the assessee beyond what was recorded in the books of account. As a result, the appeal was dismissed, and the impugned order passed by the Tribunal was upheld.