2016 (10) TMI 97 - HC - Income Tax

Double addition made over and above the income offered and taxable under any of the provisions of the Income Tax Act - sworn statement recorded from the assessee during survey operations - Held that - In the instant case, the statement of the assessee during the survey operations, no doubt, could have been made due to duress or stress of the very operations, but however, the circumstance which could be taken note therefrom is that there are no registers or records maintained by the assessee insofar as the expenditure incurred by him up to that point. Only sales and purchase details are maintained in the computer. Therefore, the sudden booking of huge expenditure in a month s time, that too, after survey operations were carried out, would lead any reasonable and prudent man to an inference that the same was deliberately booked to neutralise the obligation to report additional income of ₹ 15 lakhs over and above the normal income. When expenditure in cash is incurred, receipts/vouchers have got to be maintained accurately and the same will have to be produced for acceptance of the assessing officer. No explanation is forthcoming as to why an expenditure to the tune of ₹ 6 lakhs, has been shown to have been incurred for the first time during the relevant assessment year towards the payment of commission, while similar expenditure was not reflected at all in the preceding four years, particularly, when there was no change in the line of business activity of the assessee, all these years. Therefore, the inference drawn by the assessing officer cannot be construed to be perverse, and on the other hand, it is a reasonable deducible inference and that is exactly what the Tribunal has subscribed to.

Summary

Issues:
1. Whether the ITAT order is perverse in law?
2. Whether the ITAT was right in confirming double addition to the sum of ?15 lakhs without tangible materials?

Analysis:
1. The appeal was filed under Section 260-A of the Income Tax Act against the ITAT order allowing the Revenue's appeal. The assessee, a pharmaceutical dealer, offered additional income of ?15 lakhs during survey operations. The assessing officer discredited the claimed expenditure due to lack of supporting receipts and past inconsistency in recording such expenses. The CIT (Appeals) partially allowed the appeal, but the ITAT reversed this decision.

2. The CIT (Appeals) considered the irregular maintenance of accounts by the assessee and the voluntary disclosure of additional income while reversing the assessing officer's decision on disallowing inflated expenditure. The ITAT, however, overturned this based on the lack of proper records for the claimed cash expenditure and the sudden increase in commission payment without past precedent. The Tribunal found the assessing officer's inference reasonable, given the circumstances.

3. The High Court noted the absence of maintained records for cash expenditure before the survey and the sudden booking of substantial expenses post-survey to offset the disclosed additional income. The Court emphasized the necessity of accurate record-keeping for cash expenditures and the lack of justification for the sudden increase in commission payment during the relevant assessment year. The Court upheld the Tribunal's decision, deeming it a reasonable inference rather than perverse, and dismissed the appeal.

4. The Court clarified the concept of perversity, emphasizing the need for reasonable inferences based on available evidence. The lack of maintained records for cash expenditures, coupled with the sudden increase in commission payment without past practice, supported the assessing officer's decision. The Court found no substantial legal question for consideration and denied admission to the appeal, upholding the Tribunal's decision as reasonable and not perverse.