2019 (4) TMI 922 - AT - Income Tax

Block assessment u/s 158BC 158BD - Non filing of Income Tax returns - Revenue Authorities had rejected the acknowledgements of the returns filed by the assessee because it did not match with the records maintained by the Revenue Authorities - HELD THAT - Revenue Authorities have not conducted any investigation on that regard. Revenue Authorities also ought to have examined the copy of the returns filed by the assessee that was produced before them and thereafter arrived at a proper conclusion. Revenue Authorities had not taken any coercive action for the alleged fraud committed by the assessee. In this situation we can neither hold the matter in favour of the Revenue nor the assessee - addition made by the AO in the block assessment is devoid of merits because there is no conclusive finding by the Revenue that the assessee had not filed its return of income for the assessment years 1997-98 to 2003-04. Hence we hereby direct the Ld.AO to delete the addition made in the block assessment. Addition towards Recurring deposit - AO added the same to the undisclosed income of the assessee because the transactions were not accounted in the assessee s books of accounts - HELD THAT - In similar situation herein above in SHRI RAKESH SARIN, 2011 (6) TMI 977 - ITAT CHENNAI , we have deleted the addition made by the Ld.AO because the Ld.AO had failed to examine the return filed by the assessee and the explanation submitted. Addition towards pro notes - as during the course of search certain pro-notes were found in the assessee s premises and since no explanation could be obtained from the karta of the HUF Shri Rakesh Sarin who was unavailable at that time and the manager who was present, the Ld.AO added the aggregate of the same as the undisclosed investment - HELD THAT - The pro-notes were incomplete in all aspects and therefore presumption cannot be made that the assessee had lend money though there is some air of doubt. Moreover peak credit concept may also be applicable in the case of the assessee due to rotation of advances and repayments. It appears that the Ld.AO has not examined those aspects. There is every probability that if such exercise would have been carried out the source of the amount utilized in the finance business would have been explainable as the amount utilized in the business would have been much less than the addition made by the Ld.AO. Therefore adhoc addition of the amount mentioned in the entire pro-notes is not justifiable. Further the Ld.AO has also not made any investigation in the market to find out whether any amount borrowed from the assessee was pending to be returned to the assessee. Further the Ld.AO had also not made proper investigation from the borrowers. When the Ld.AO has not made any investigation on this regard addition made only on the basis of presumption is not justifiable Addition being the amount advanced to M/s. BMB Productions as unexplained advances - HELD THAT - As during the course of search proceedings it was observed by the Ld.AO that the assessee had advanced money to M/s. BMB Productions and the same was returned. Since excess money of ₹ 1,50,000/- was returned, theLd.AO added the same to the income of the assessee which was subsequently confirmed by the Ld.CIT(A). Before us neither the assessee nor the Ld.AR has produced any materials or advanced any arguments to negate the finding of the Ld.Revenue Authorities, therefore we have no other options but to confirm the order of the Ld.Revenue Authorities. Accordingly we hereby confirm the addition of ₹ 1,50,000/- made by the Ld.AO

Issues involved:
1. Non-filing of Income Tax returns
2. Addition of ?5,10,770/- for undisclosed income
3. Addition of ?3,03,125/- towards Recurring Deposit
4. Addition of ?11,45,000/- towards undisclosed investment
5. Addition of ?1,50,000/- as unexplained advances

Issue 1: Non-filing of Income Tax returns
The assessee challenged the finding that they had not filed income tax returns for the block period before the search date. The Assessing Officer (AO) added ?5,10,770/- as undisclosed income. The assessee argued that they had filed returns and provided acknowledgements, but the AO deemed them bogus. The tribunal found the Revenue's lack of conclusive evidence and directed the AO to delete the addition.

Issue 2: Addition of ?3,03,125/- towards Recurring Deposit
The AO added this amount to the undisclosed income as the transactions were unaccounted for. However, the tribunal noted the AO's failure to examine the filed return and explanations. Following similar cases, the tribunal directed the AO to delete this addition.

Issue 3: Addition of ?11,45,000/- towards undisclosed investment
Pro-notes found during the search led to this addition by the AO. The tribunal found the pro-notes incomplete and doubted the lending, suggesting a lack of investigation by the AO. Similar to related cases, the tribunal directed the AO to delete this addition due to insufficient evidence and justification.

Issue 4: Addition of ?1,50,000/- as unexplained advances
The AO added this amount due to advances made to M/s. BMB Productions, which were later returned. The tribunal confirmed this addition as neither the assessee nor their representative provided arguments or evidence to counter the AO's findings.

In conclusion, the tribunal partly allowed the appeal, directing the AO to delete certain additions while confirming others based on the merits of each issue.

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