2017 (12) TMI 123 - AT - Income Tax

Addition on basis of seized document - addition on adjustment to reduce the excess profit of ₹ 20 crores - Held that - Though the document in question was not recovered from the possession of the assessee-company, any how, it would not give rise to the addition in question. The A.O. heavily relied upon the seized document copy of which is filed at page-358 of the paper book as well as reproduced in the assessment order. According to it, the estimated profit of year ending in appeal was estimated at ₹ 160 crores. The assessee-company, as per the seized document declared ₹ 140 crores as profit plan as per advance tax. Therefore, it was considered a reduction in the profit of ₹ 20 crores. It is not in dispute that ultimately the assessee- company declared taxable income of ₹ 160,14,24,547. The A.O. in the computation of income has taken the same figure. Therefore, even if the seized document is considered adverse in nature against the assessee-company, assessee-company has already declared more taxable income in the return so filed after the search. Therefore, there is no case of reduction of the profit in the facts and circumstances of the case. Further, A.O. has not brought any evidence on record that as against the declared income at ₹ 167 crores, there is any manipulation or reduction of the profit in the books of account of the assessee-company. Therefore, the A.O. has miserably failed to support his findings for making addition of ₹ 20 crores. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of ?20 crores in income tax return for A.Y. 2012-2013 based on seized document.

Analysis:
1. Search Operation and Addition of ?20 Crores:
- Search and seizure operation conducted under section 132/133A led to the discovery of Annexure-AA-1 mentioning an adjustment by the assessee-company to reduce excess profit by ?20 crores.
- Assessee-company explained the adjustment citing exceptional profits, deposited tax on additional income, and filed the return accordingly.
- AO made an addition of ?20 crores to the income, questioning the reduction in taxable profits based on seized document and tax payments made by the company.

2. Challenge Before CIT(A) and Deletion of Addition:
- Assessee-company challenged the addition before CIT(A), reiterating correct income declaration and non-implementation of the adjustment mentioned in the seized document.
- CIT(A) found no evidence supporting the reduction of profit by ?20 crores and deleted the addition, upholding the assessee's income declaration.

3. Appeal and Cross-Objection:
- Revenue appealed against the deletion of the ?20 crores addition, while the assessee-company filed a cross-objection in support of CIT(A)'s decision.

4. Arguments and Decision:
- Revenue argued for the addition based on the seized document and presumption against the assessee for lack of evidence.
- Assessee contended that the document was not in their possession, declared higher income than estimated, and no evidence of profit reduction was found during the search.
- ITAT Delhi dismissed the departmental appeal, emphasizing that the assessee declared more income than estimated, and no evidence of profit manipulation was presented.
- Cross-objection by the assessee was dismissed as it merely supported CIT(A)'s decision, which was not maintainable.

In conclusion, the ITAT Delhi upheld the CIT(A)'s decision to delete the addition of ?20 crores, dismissing the departmental appeal and the assessee's cross-objection. The judgment highlighted the importance of evidence and proper assessment in determining taxable income, ultimately ruling in favor of the assessee based on the lack of concrete evidence supporting the addition.