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2019 (10) TMI 1118 - AT - Income TaxUndisclosed bank account - as submitted that the bank manager of the said bank also knew that the said bank account was an undisclosed bank account and consequently, the Bank Manager used the said account of the assessee for certain unaccounted transactions of other customers of said branch - HELD THAT - A perusal of the statement recorded by the DCIT u/s.131 of the Act from the Assistant Manager of Indian Bank, Sivakasi branch on 26.05.2016 clearly shows from the letter of the Bank Manger dated 28.03.2016 admitting to the transactions have been done by the Bank Manager in the assessee s account and not relating to the assessee stands clearly established. Branch Manager has categorically admitted in his letter and the same has also been reiterated by the Assistant Manager in his statement recorded u/s.131 of the Act by the DCIT, we are inclined to accept the same and consequently the AO is directed to delete the addition representing the credits to an extent of ₹ 2,36,00,000/- for assessment year 2010-11 and ₹ 1,41,73,539/- for the assessment year 2011-12 in the assessment of the assessee. In respect of balance credits, admittedly what is liable to be added only peak credit as this is an unaccounted bank account and a perusal of the bank account clearly shows that there are withdrawals and deposits. However, it is noticed that the assessee has filed an application admitting its GP for the purpose of addition before the Hon ble Settlement Commission at 24%. The assessee has not shown any addition having been offered on account of the initial capital. Consequently, we are of the view that the interest of justice would be served, if the GP rate is adopted at 30% in respect of unaccounted credits in the Indian Bank account, which is the unaccounted bank account and has been accepted by the assessee - addition made by the AO in respect of the said bank account stands modified and the AO is directed to restrict the addition to 30% representing the GP and initial capital required in respect of the credit of ₹ 32,88,176/- accepted by the assessee for the assessment year 2010-11 and 30% as GP in respect of the credits accepted by the assessee to an extent of ₹ 2,59,70,330/- for the assessment year 2011-12. Appeals filed by the assessee for the assessment years 2010-11 2011-12 stands partly allowed. Benefit of set off of the undisclosed income as source for the unexplained expenditures - In respect of assessment years 2012-13, 2013-14, and 2014-15 Admittedly, GP addition of 30% in respect of unexplained credits accepted and appearing in the unaccounted bank account with Indian Bank Sivakasi, has been directed for the assessment years 2010-11 2011-12. This being so, admittedly there would be income available to the assessee on account of the said GP addition. This income would very much be available to the assessee for the purpose of set off of the unexplained expenses which have been added for the assessment years 2012-13, 2013-14 2014-15. This being so, the Assessing Officer is directed to grant assessee the benefit of set off of the undisclosed income added for the assessment years 2010-11 2011-12 as source for the unexplained expenditures added by invoking the provisions of sections 69 69C of the Act for the assessment years 2012-13 2013-14 2014-15.
Issues Involved:
1. Undisclosed bank account transactions for assessment years 2010-11 and 2011-12. 2. Unexplained expenditures for assessment years 2012-13, 2013-14, and 2014-15. Issue-wise Detailed Analysis: 1. Undisclosed Bank Account Transactions for Assessment Years 2010-11 and 2011-12: - Background: The assessee, a partner and director in various companies, was involved in the manufacture and sale of fireworks. A search on the group led to the discovery of an undisclosed bank account with Indian Bank, Sivakasi Branch. The Settlement Commission rejected the assessee's application for settlement due to insufficient proof regarding the transactions made by the Bank Manager. - Contentions: The assessee claimed that certain credits in the bank account were not related to him but were transactions conducted by the Bank Manager for other customers. For assessment year 2010-11, out of total credits of ?2,68,88,176/-, only ?32,88,176/- belonged to the assessee. For assessment year 2011-12, out of total credits of ?4,01,43,869/-, only ?2,59,70,330/- belonged to the assessee. The assessee admitted a gross profit (GP) addition of 24% on his transactions before the Settlement Commission. - Evidence: A sworn statement recorded under Section 131 of the Income Tax Act from the Indian Bank Assistant Manager, along with a letter from the Bank Manager dated 28.03.2016, confirmed that the transactions amounting to ?2.36 crores and ?1.41 crores did not belong to the assessee but to other customers. - Judgment: The Tribunal acknowledged the evidence and directed the Assessing Officer to delete the additions representing the credits of ?2,36,00,000/- for assessment year 2010-11 and ?1,41,73,539/- for assessment year 2011-12. For the remaining credits, the Tribunal adopted a GP rate of 30% on the unaccounted transactions of ?32,88,176/- for assessment year 2010-11 and ?2,59,70,330/- for assessment year 2011-12, considering the initial capital required for these transactions. 2. Unexplained Expenditures for Assessment Years 2012-13, 2013-14, and 2014-15: - Background: The assessee incurred unexplained expenditures in subsequent assessment years, claimed to be out of unaccounted income from earlier years. - Contentions: For assessment year 2012-13, unexplained expenditures included ?1,50,000/- for foreign travel, ?14,60,960/- paid to M/s. Vadivel Pyrotech Pvt Ltd, and ?13,900/- for land purchase. For assessment year 2013-14, the additions were ?1 lakh for foreign travel and ?35 lakhs in HDFC Life insurance. For assessment year 2014-15, the additions were ?1 lakh for foreign travel and ?27,50,000/- in HDFC Life insurance. The assessee sought a set-off of income from earlier years against these expenditures. - Judgment: The Tribunal directed the Assessing Officer to grant the assessee the benefit of set-off of the undisclosed income added for assessment years 2010-11 and 2011-12 against the unexplained expenditures for assessment years 2012-13, 2013-14, and 2014-15. This was based on the GP addition of 30% on unexplained credits accepted in the unaccounted bank account. Conclusion: - The appeals for assessment years 2010-11 and 2011-12 were partly allowed with a modification in the additions based on the GP rate. - The appeals for assessment years 2012-13, 2013-14, and 2014-15 were partly allowed with a directive to set off the unexplained expenditures against the undisclosed income from earlier years. - Overall, all appeals filed by the assessee for the assessment years 2010-11, 2011-12, 2012-13, 2013-14, and 2014-15 were partly allowed.
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