2020 (1) TMI 55 - HC - Income Tax

Addition as income from outside sources in the books of account - additions made by the AO during a search and seizure operation at the business and residential premises of the assessee - HELD THAT - Tribunal held that figures which were written in a diary which was seized from the house of the assessee would have to be explained to some extent at least, and the assessee could not get away merely by asserting that even though those diaries were recovered from him yet since the handwriting was not proved to be his, he had no duty at all to explain about all those figures. The Tribunal also noticed that the assessee had initially owned these entries and had stated that they were of subsequent years i.e. 1990-91 and he would explain them in that year's return but he did not explain them. The reasoning adopted by the Tribunal is correct while that adopted by the Commissioner was perverse. Once the assessee accepted the documents which were seized from his premises, and once he had owned the entries and undertaken to explain them in the next financial year and had not offered any explanation whatsoever the amount representing were rightly added to other income of the assess. Application of Gross Profit (GP) rate on the difference of the stock which was physical present in stock register - Finding of the Tribunal is a pure finding of fact and no sufficient cause has been shown to us to reverse the same.

Summary

Issues:
1. Challenge against deletion of additions made by Commissioner during assessment procedure.
2. Ownership and explanation of entries found in seized documents.
3. Application of Gross Profit rate on the stock difference.

Analysis:
1. The appeal was filed against the order of the Income Tax Appellate Tribunal (ITAT) allowing the Revenue's challenge to the deletion of certain additions made by the Commissioner during an assessment procedure. The additions were based on entries found during a search and seizure operation at the assessee's premises. The Commissioner had deleted these additions as the recovered documents did not bear the assessee's handwriting or that of any associated person. The Tribunal, however, held that the assessee, who initially owned the entries and undertook to explain them in the next financial year but failed to do so, should be held accountable for the unexplained amount added to their income.

2. The Tribunal's reasoning was deemed correct, contrasting with the Commissioner's decision, which was considered perverse. The Tribunal emphasized that the assessee's acceptance of the seized documents, ownership of the entries, and commitment to explain them in the subsequent year without providing any explanation justified the addition of the amount to their income. The Tribunal rejected the argument that the handwriting in the diaries was not proven to be the assessee's, stating that the responsibility to explain the figures still rested with the assessee.

3. Another issue revolved around the application of Gross Profit (GP) rate on the difference in stock physically present in the stock register. The Tribunal's decision on this matter was regarded as a factual finding, and no substantial reason was presented to reverse it. Consequently, the appeal was dismissed, and any pending applications were disposed of in light of the main case's outcome.