2021 (11) TMI 504 - HC - Income Tax

Unexplained investments u/s 69- Tribunal deleted the addition - addition based on the extrapolated data - second round of litigation - HELD THAT - As decided in Gowri Gopal Textile Processing P. Ltd. 2011 (9) TMI 325 - KARNATAKA HIGH COURT while considering the computation of undisclosed income of the block period with reference to Section 158BB, has observed that in the absence of the word Computation defined under the Act, the meaning of the word has to be gathered from the scheme of the Act having regard to its ordinary grammatical meaning. The word assessment is the action of the Assessing Officer for determination of the amount of taxation, the scheme of charge or taxation. The term assessed being flexible, it bears very comprehensive meaning. Therefore, under Section 158BB of the Act, the Assessing Authority has to compute the undisclosed income falling within the block period, is not expected to assess the undisclosed income. Even in the event of undisclosed income, if the books are not available or the books are destroyed or there is suppression of actual sales, taking into consideration the totality of the circumstances, it is open to the Assessing Authority to estimate the income of the assessee. No reasons to differ from this dictum pronounced by the Co-ordinate Bench. The said ruling being squarely applicable to the facts of the present case, we answer the substantial question of law No.1 in favour of the assessee and against the Revenue. Addition of bogus expenditures - undisclosed payment of development charges to M/s. JAIC - Tribunal deleted the addition - HELD THAT - To establish the factum that assessee said to have been incurred as expenditure towards the development charges, the assessee has placed the material evidence by producing necessary documents as per the profit and loss account of the assessee and profit and loss accounts of the JAIC with break-up figures which were made available before the Authorities as well as the Tribunal. The Tribunal having considered these factual aspects, has allowed the appeal of the assessee rejecting the Revenue s appeal. These issues being related to pure questions of facts, no question of law much less the substantial question of law would arise for determination by this Court in exercising the powers under Section 260A of the Act. - Decided against revenue.

Summary

Issues Involved:

1. Unexplained investments in lands at Buttahanahalli.
2. Bogus expenditure on lands at Gooliyanandagunda village.

Issue-wise Detailed Analysis:

1. Unexplained Investments in Lands at Buttahanahalli:

The primary issue concerns the unexplained investments in lands at Buttahanahalli amounting to ?82,86,250/-. The Assessing Officer (AO) made additions based on registered sale deeds and agreements to sell, which were not recorded in the books, amounting to ?33,98,250/-. Further, the AO extrapolated this rate to other lands, adding ?50,64,555/-, relying on statements from some farmers. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this addition. However, the Tribunal noted that the AO did not follow the Tribunal's directions from the first round and did not allow the assessee to cross-examine the farmers. Citing the Supreme Court ruling in Andaman Timber Industries v. CCE, the Tribunal found the addition unsustainable.

The High Court referenced the Co-ordinate Bench ruling in Commissioner of Income-Tax, Bangalore v. Gowri Gopal Textile Processing [P.] Ltd., which emphasized that undisclosed income for the block period must be based on actual evidence seized during the search and not on estimations. The term "computation" involves methodical calculation based on available data, distinct from "estimation," which is based on probabilities. The AO is required to compute undisclosed income based on seized material, not estimate it. The High Court agreed with this interpretation and ruled in favor of the assessee, stating that the AO's addition based on extrapolated data was not permissible.

2. Bogus Expenditure on Lands at Gooliyanandagunda Village:

The second issue pertains to the alleged bogus expenditure of ?92,00,200/- claimed by the assessee for land development at Gooliyanandagunda village. The AO and CIT(A) found that the receipts in the books of the sister concern, Jansons Architectural and Interior Consultants (JAIC), did not reflect any amounts received from the assessee for this project. The Tribunal, however, noted that the assessee had not claimed this deduction for any assessment year within the block period. The Tribunal found that the entire exercise by the Revenue to consider these development charges as bogus was imaginary.

The High Court examined the material presented, including the statement of account showing amounts received by JAIC from various persons, including ?10,00,000/- from the assessee and ?82,00,200/- from Mrs. Pyari Jan and Iffath Maab. The Tribunal confirmed that the assessee had only paid ?10,00,000/- to JAIC, which was reflected in the profit and loss accounts of both the assessee and JAIC. The High Court noted that the Tribunal, as the last fact-finding authority, had meticulously examined these facts and found no basis for the Revenue's addition of ?92,00,000/- as bogus expenditure. The High Court ruled that these findings were related to pure questions of fact and did not raise any substantial question of law for further adjudication.

Conclusion:

The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision to delete the additions made by the AO regarding unexplained investments and bogus expenditure. The Court emphasized that the findings on pure questions of fact by the Tribunal are not subject to further adjudication under Section 260A of the Income Tax Act.