2019 (6) TMI 98 - AT - Income Tax

Surrender of income - Voluntary disclosure - survey proceedings u/s 133A - assessee had failed to establish that the increase in gross receipts - contention of the Ld. AR that the surrendered amount is subsumed in the gross receipts - HELD THAT - There is an increase in the depreciation charge to the tune of ₹ 12,73,417/- in the year under consideration as compared to the immediately preceding assessment year. Similarly, the salary to partners rose from ₹ 20,00,960/- in AY 2009-10 to ₹ 30,68,370/- in the year under consideration thus resulting in an increase of ₹ 10,67,410/- as compared to the immediately preceding year. Similarly, there is an increase in the interest to the partners in the year under consideration to the tune of ₹ 3,25,173/- as compared to the immediately preceding assessment year. These figures are undisputed and have also been recorded in the impugned order. It is also an accepted fact that the gross receipts have jumped from ₹ 33,122,988/- in AY 2009-10 to ₹ 43,581,430/- in the year under consideration thus showing a substantial increase of ₹ 10,458,442/- as compared to the immediately preceding assessment year. On such facts, we are of the considered opinion that the contention of the AR that the surrendered amount is subsumed in the gross receipts is to be agreed to. The fall in the net profit is also duly explained by the increase in depreciation, salary and interest to partners which works out to ₹ 26,66,000/-. Therefore, we are unable to concur with the findings of the lower authorities and we set aside the order of the Ld. CIT (A) and direct the AO to delete the addition. - Decided in favour of assessee

Summary

Issues:
1. Addition of undisclosed income during survey proceedings.
2. Challenge to the addition by the assessee.
3. Analysis of gross receipts and net profit.
4. Validity of addition based on partner's statement.

Analysis:
1. The case involved an appeal by the assessee against the addition of undisclosed income of ?20 lakh during survey proceedings under Section 133A of the Income Tax Act, 1961. The partner of the firm had agreed to surrender this amount, leading to an increased total income declaration by the assessee.

2. The assessee challenged the addition before the Ld. Commissioner of Income Tax (Appeals) and subsequently before the ITAT. The Ld. Authorised Representative argued that the surrender was made under pressure during the survey, and the surrendered amount was reflected in increased gross receipts. An alternate plea was made that the addition should not solely rely on the partner's statement without corroborative evidence.

3. The Ld. Sr. Departmental Representative contended that the Assessing Officer was justified in making the addition based on the voluntary surrender by the partner. It was argued that the increased gross receipts did not correlate with the surrendered amount, leading to a decrease in net profit compared to previous years. The Ld. Sr. DR also emphasized the observations of the Ld. Commissioner of Income Tax (A) regarding the lack of evidence linking the gross receipts increase to the surrendered amount.

4. Upon considering the submissions and evidence, the ITAT found merit in the assessee's argument. Analysis of the financial figures revealed a significant increase in depreciation, partner salaries, and interest, which explained the decrease in net profit. The substantial rise in gross receipts was deemed to include the surrendered amount, justifying the assessee's position. Consequently, the ITAT set aside the Ld. Commissioner of Income Tax (A)'s order and directed the Assessing Officer to delete the addition, allowing the appeal of the assessee.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the ITAT's decision based on a thorough examination of the financial aspects involved in the case.