2019 (3) TMI 585 - HC - Income Tax

Estimation of unaccounted income - entries contained in the diaries collected from the assessee during search - HELD THAT - The assessee did not dispute the contents of that diary and in fact admitted that as shown in the diary he had made the payments to the colleges and sub-brokers to the tune of ₹ 2906.30 lakhs. In a further question asking him to disclose his immovable assets, the assessee had stated that he had purchased office at Navi Mumbai in 2007, a house in Goa in April 2008, a house at Pune in 2008, two flats and a shop at Pune in 2008, two flats at Goa in 2007, a house in his mother s name at Goa in 2007, a house in his father s name at Raypur in 2007 and a plot of four and half acres at Goa in 2005. When it is thus established that the assessee was engaged in the activity of ensuring admissions of students in educational institutions by paying illegal capitation fees and when it is further established that such payments made during two relevant assessment years came close to 2906.30 lakhs, the only question remains to be decided would be as to what would be the assessee s earning out of such dealings by way of his commission. In absence of the assessee bringing on record any material to enable the revenue authorities to estimate the same with any degree of accuracy, the revenue was left with no choice but to estimate the same on the basis of available material on record. What would be the calculation of percentage of amount that the assessee would have retained in himself, in such circumstances, would always be a matter of estimation. The conclusion of the Tribunal cannot be stated to be perverse. No question of law arises.

Summary

Issues:
Challenging additions made by assessing officer, estimation of income from unaccounted activities, dispute over additions and estimation, factual nature of the issue, concurrent conclusions of revenue authorities and tribunal, estimation of commission percentage, lack of material for accurate estimation.

Analysis:
The judgment involves two appeals filed by the assessee to challenge a common judgment of the Income Tax Appellate Tribunal concerning additions made by the assessing officer. The appeals revolve around disputing various additions made in the hands of the assessee, which were confirmed by the CIT (Appeals). The assessing officer conducted a search operation on the premises of the assessee, resulting in the seizure of incriminating documents, including diaries containing cash receipts and payments related to securing admissions for students in academic institutions through capitation fees. The assessee admitted to the payments recorded in the diaries and the absence of maintaining proper books of account for such transactions.

During post-search inquiries, the assessing officer requested details regarding the students on whose behalf the payments were made, but the assessee did not provide the information, leading to an estimation of the assessee's income from the activity. The appellate commissioner partially upheld the additions, leading to further appeal before the Tribunal, which granted partial relief by reducing the additions to 20% of total cash payments. The core issue was the estimation of the assessee's income, with the tribunal concluding that unaccounted income was earned, necessitating an estimation of the commission percentage.

The High Court found the issue to be factual, with all authorities concurring on the assessee's unaccounted income. The Tribunal's estimation of 20-25% of the total turnover as the assessee's income was deemed reasonable, especially considering the investments made by the assessee in immovable properties around the same time. The Court highlighted that the assessee's admission to the diary entries and lack of material for accurate estimation left the revenue authorities with no choice but to estimate the income based on available evidence, making the Tribunal's decision non-perverse.

Ultimately, the Court dismissed the appeals, emphasizing the factual nature of the issue, the lack of legal questions, and the reliance on concurrent findings of the revenue authorities and the Tribunal for the estimation of unaccounted income from the assessee's activities related to student admissions in educational institutions through capitation fees.