2020 (11) TMI 369 - AT - Income Tax

Addition pertaining to surrender made during the course of survey - main contention of the Ld A.R. was that the assessee did not maintain books of account at the time of survey and hence she surrendered the additional income - HELD THAT - Assessee has subsequently maintained books of accounts and got it audited also. We notice that the AO has not examined books of accounts at all - assessee has surrendered the income during the course of survey and the assessee has tried to rebut the same by furnishing regular books of accounts. AO should have examined the books of accounts and should have given proper reasoning as to why the surrendered amount of ₹ 60.00 lakhs is still liable to be taxed. AO has accepted the books of account and hence assessed the business income declared by the assessee voluntarily. CIT(A) has reduced the same to ₹ 5.00 lakhs, which may not be a correct action. The relief, if any, could be granted in respect of additional income only and it should be presumed that the relief of about ₹ 21.69 lakhs granted by the Ld CIT(A) is towards alleged additional income of ₹ 60.00 lakhs. Further, the Ld CIT(A) has also made various observations without examining books of accounts. Examination of books of accounts of the assessee would help to decide the question as to whether the addition of ₹ 60.00 lakhs (to the extent sustained by Ld CIT(A)) is still warranted or not. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining the issue afresh duly examining the books of accounts. Non-granting of set off of brought forward loss and depreciation - submission of the assessee that she has furnished copies of returns of income filed by her for earlier years - HELD THAT - If the said returns of income have been accepted as it is and if they have been filed within the due dates prescribed u/s. 139 (1) of the Act, in our view, there should not be any impediment in allowing the claim. Since it is a matter of verification of facts, we restore this issue also to the file of the AO with the direction to examine the claim of the assessee vis- -vis the documents furnished and decide the same in accordance with law.

Summary

Issues:
1. Addition of ?60.00 lakhs pertaining to surrender made during the course of survey.
2. Non-granting of set off of brought forward loss and depreciation.

Analysis:
1. The assessee, previously operating a garment manufacturing unit, later started a SPA and beauty parlour. During a survey, she admitted to not maintaining proper accounts and surrendered ?60.00 lakhs as additional income. The assessing officer added this amount to her income as she did not declare it in her return. The CIT(A) upheld this addition, doubting the authenticity of a letter submitted by the assessee estimating her income and losses. The ITAT observed that the AO did not examine the books of accounts, and hence, directed a fresh examination of the issue to determine if the addition was justified.

2. The assessee claimed set off of brought forward losses and unabsorbed depreciation, supported by past IT returns. The CIT(A) rejected this claim, citing lack of proof. The ITAT noted that if the past returns were filed within the due dates, the claim should be considered. Thus, the ITAT remanded this issue to the AO for verification and decision in accordance with the law, ensuring the assessee's right to be heard.

In conclusion, the ITAT allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and directing the AO to re-examine both issues by considering the books of accounts and verifying the documents provided by the assessee for the set off claim.