2020 (4) TMI 738 - AT - Income Tax

Estimation of income - Addition on statement during the course of survey - CIT- A deleted the addition - As per revenue basis for making addition was not only the statement recorded by the Revenue during the course of survey but also the profit and loss account extracted from the computer system of the assessee on the basis of which the assessee has disclosed his income - HELD THAT - CIT(Appeals) has failed to appreciate the statement of the assessee and further failed to examine the profit and loss account retrieved at the time of survey which was admitted to be correct by the assessee. On the basis of this extracted profit and loss account from the computer for the relevant assessment year upto 19.01.2010, the assessee has declared his income of ₹ 8.63 Crores . The assessee on his own in reply to Question No.25 had over and above the already agreed income of ₹ 8.63 Crores have also admitted that he would have an income of ₹ 9.5 Crores (inclusive of ₹ 8.63 Crores) upto 31.03.2010. Besides that the assessee had also declared the additional income of ₹ 2.60 Crores and ₹ 2.20 Crores for the assessment year 2008-09 and 2009-10 respectively. CIT(Appeals) had wrongly read the statement of the assessee and have further failed to appreciate the accounts as on 19.01.2010 were duly admitted and acknowledged by the assessee as correct. Hence, the right course would be for the Ld. CIT(Appeals) to freeze the profit and loss account of the assessee upto 19.01.2010 and thereafter, the profit and loss account for the remaining period was required to be re-casted and based on that profit of the assessee should have been calculated. Needful was not done by the Assessing Officer or by the Ld. CIT(Appeals) - remand the matter to the file of the Ld. CIT(Appeals) - Appeal of the Revenue is allowed for statistical purposes

Summary

Issues:
1. Addition of income based on survey statement and profit & loss account.
2. Deletion of addition by CIT(A) without concrete evidence.
3. Interpretation of statement and assessment of income for different years.

Analysis:
1. The Revenue appealed against CIT(A)'s deletion of an addition of income made by the Assessing Officer. The AO based the addition on the survey statement and profit & loss account extracted from the assessee's computer system. The AO noted a difference between the declared income and the actual profit. The CIT(A) found the addition lacked concrete evidence and was solely based on the statement without corroborative documents. The CIT(A) agreed with the appellant that such an ad-hoc addition was unwarranted, leading to deletion of the addition.

2. The Revenue contended that the CIT(A) erred in not considering the survey statement where the assessee proposed to revise returns for previous years and the current year. The Revenue argued that the CIT(A) misinterpreted the cumulative income mentioned in the statement as pertaining to multiple assessment years. The CIT(A) upheld the deletion of the addition based on the authenticity of the profit and loss account submitted by the assessee post-survey.

3. The ITAT found that the CIT(A) failed to analyze the statement and the profit & loss account extracted during the survey adequately. The ITAT suggested freezing the account till the survey date and recalculating the profit for the remaining period. It directed the CIT(A) to consider the post-survey profit and add it to the income declared on the survey date. The ITAT remanded the matter to the CIT(A) for further examination and instructed to follow principles of natural justice.

In conclusion, the ITAT allowed the Revenue's appeal for statistical purposes, directing a re-examination of the profit and loss account post-survey for accurate income assessment.