2016 (11) TMI 1025 - HC - Income Tax

Addition on account of surrender during the survey under section 133A - Held that - AO found that the pre-survey and post-survey profit and loss account of the assessee showed for the period 01.04.2006 to 07.09.2006 a net profit of ₹ 83,47,719/- and for the latter period i.e. from 08.09.2006 to 31.03.2007 net profit of ₹ 77.75 lacs which included an amount of ₹ 67 lacs as income surrendered during the survey. On this basis, it was found that the net profit for the post-survey period itself was about ₹ 10,75,832/-. Accordingly, this amount was added to the surrendered income of ₹ 1,60,00,000/-. The Tribunal confirmed the Assessing Officer s view that by preparing the profit and loss account in a particular manner, the assessee had attempted to circumvent the undertaking given in the said letter. The Tribunal also agreed that there was voluminous incriminating material found during the survey and by surrendering the said amount, the assessee had the benefit of having the further enquiry shut. The view taken by the Assessing Officer and the Tribunal cannot be said to be perverse. The amount of ₹ 1,60,00,000/- had been surrendered for the first half of the year. The assessee itself showed a profit of the said amount of ₹ 10.76 lacs and therefore added the same to the surrendered amount of ₹ 1,60,00,000/-. It is to say the least a possible approach to the matter. Addition on account of unsecured loans under section 68 - Held that - The income of all the creditors was below the taxable limit. All of them had their accounts with the Punjab National Bank, Dhuri Branch. We will overlook the fact that the affidavits filed by them are identical. The Tribunal analyzed all the cases individually. For instance, in respect of one of the creditors, namely, Ms. Ranjit Kaur, it was found that she earned a professional income. She opened her account on 18.08.2006 with a sum of ₹ 1500/- and then deposited a sum of ₹ 3,00,000/- in cash on 23.08.2006 and issued a cheque of the same amount on the same day i.e. 23.08.2006. As observed by the Tribunal, if she was a professional, there was no explanation why she had not opened her own account earlier. Moreover, her income was stated to be only ₹ 82,000/- per annum. There was no explanation as to how she had suddenly obtained ₹ 3,00,000/-. In this manner, the Tribunal also analyzed the case of the other alleged lenders.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) regarding the addition of surrendered amount during a survey.
2. Whether the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) regarding the addition of unsecured loans.
3. Whether the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) regarding the addition of interest on unsecured loans.
4. Whether the order of the Income Tax Appellate Tribunal was perverse and should be set aside.

Analysis:

Issue 1: Surrendered Amount during Survey
The appellant contested the addition of a surrendered amount during a survey under section 133A. The Tribunal upheld the Assessing Officer's decision, stating that the appellant attempted to circumvent the undertaking given during the survey. The Tribunal found voluminous incriminating material during the survey and concluded that the appellant benefited from shutting down further inquiry by surrendering the amount. The High Court held that the approach taken by the Assessing Officer and the Tribunal was not perverse, as the surrendered amount was added based on the appellant's profit declaration. The Court found no substantial question of law in this regard.

Issue 2: Unsecured Loans
The Assessing Officer raised concerns about unsecured loans received by the appellant from various parties. Only two out of twelve parties responded to summons, leading to doubts about the legitimacy of the transactions. The Tribunal found discrepancies in the creditors' accounts and highlighted coincidental deposits before advancing loans to the appellant. The Tribunal scrutinized individual cases and found inconsistencies, such as unexplained large deposits compared to the creditors' income. The Court agreed with the Tribunal's analysis, deeming the view taken as not perverse or unsustainable. Therefore, this issue was decided against the assessee.

Issue 3: Interest on Unsecured Loans
Following the decision on unsecured loans, the Court answered this question against the assessee, aligning with the ruling on the previous issue.

Issue 4: Perverse Order
The Court concluded that the Tribunal's order was not perverse based on the analysis of the preceding issues. As a result, the question challenging the Tribunal's order was dismissed, upholding the Tribunal's decision.

In summary, the High Court dismissed the appeal against the Income Tax Appellate Tribunal's order, finding the Tribunal's decisions regarding the surrendered amount during a survey, unsecured loans, and interest on loans to be justified. The Court upheld the Tribunal's findings, stating that they were not perverse and did not warrant setting aside the order.