2022 (2) TMI 1097 - HC - Income Tax

Inflation of expenses on account of lorry hire charges paid - ITAT not accepting the contention of the AO as to the authenticity of the books of accounts produced by the assessee in the course of search and survey operations who rejected the contention of the assessee that the records were destroyed by fire and that the whole of the contents of the books of accounts were audited by the authorised representative cum auditor of the assessee - HELD THAT - Tribunal on noting the facts found that in the course of search which commenced on November 5, 2009, the survey team had seized electronic data and other records. However, there was no finding that any entry therein was false or fabricated - CIT(A) had set aside the findings of the assessing officer which had disbelieved the fire accident which took place in the office premises of the assessee at Strand Bank Road, Kolkata. Noting the facts, the Tribunal found that the assessee was able to substantiate with official records to show that there was a fire accident in the said premises which had destroyed the records. DR who appeared before the Tribunal could not controvert the said fact. Apart from that the other factual findings rendered by the CIT(A) were also considered and approved by the Tribunal. Thus we find there is no question of law much less substantial question of law arising on these issues, which have been raised in question Nos. 1 to 3. Accordingly, the same stand rejected. Addition toward immovable property - loan paper or any supporting documents were not produced during the assessment which may relate the loan or advances to the payment toward immovable property - ITAT deleted the addition - HELD THAT - Tribunal after considering the factual submissions made by the assessee has verified the correctness of the finding rendered by the CIT(A) and held that the department could not controvert any of the facts which were recorded by the CIT(A) while allowing the assessee s appeal. Thus, we find there is no question of law arising for consideration on this issue as well and the same stands rejected. Addition made on account of cash payment noted in seized document - ITAT deleted the addition - HELD THAT - Tribunal found that the payments made during the financial year 2006-07 and in the subsequent years were all through banking channel and reflected in the balance sheet for the assessment year 2007-08 and subsequent years. Further the investment was financed to the extent of ₹ 1.15 crore by ICICI Bank which was explained at the assessment stage. Furthermore, the total investment made by the assessee was also found to be recorded in the books of accounts. These factual findings which were recorded by the CIT(A) could not be controverted by the department when the appeal was heard by the Tribunal. Thus, we find no substantial question of law arising for consideration

Summary

Issues:
1. Authenticity of books of accounts produced by the assessee
2. Rejection of books of accounts and estimation of profits
3. Reliance on retracted statement of the authorized representative
4. Addition of unsecured loans based on retraction
5. Deletion of addition towards immovable property
6. Addition on account of cash payment noted in seized documents

Authenticity of Books of Accounts:
The High Court considered the appeal by the revenue challenging the Tribunal's order regarding the authenticity of the books of accounts produced by the assessee. The Tribunal had found that the assessee was able to substantiate the fire accident that destroyed the records, and the department could not refute this fact. The Court noted that no entry in the seized electronic data was false or fabricated. Consequently, the Court rejected the substantial questions of law raised by the revenue on this issue for all assessment years from 2004-05 to 2010-11.

Rejection of Books of Accounts and Estimation of Profits:
Regarding the rejection of books of accounts and estimation of profits by the Assessing Officer, the Court upheld the findings of the Tribunal. The Tribunal had conducted a thorough factual examination and approved the CIT(A)'s findings, which disbelieved the fire accident and allowed the appeal filed by the assessee. The Court found no substantial question of law arising on this issue for all assessment years from 2004-05 to 2010-11.

Reliance on Retracted Statement:
The Court addressed the issue of reliance on the retracted statement of the authorized representative of the company. The Tribunal had not accepted the initial statement admitting inflation of expenses, and the Court found that the department failed to prove coercion or duress in the retraction. Consequently, the Court rejected the substantial question of law raised on this issue.

Addition of Unsecured Loans and Immovable Property:
The Court considered the addition of unsecured loans and immovable property. For the unsecured loans, the Tribunal had deleted the addition based on a retraction made by the authorized representative, which the Court found had no legal value. Additionally, the Court noted that the investment in immovable property was financed through a bank and recorded in the books of accounts, leading to the deletion of the addition. The Court rejected the substantial questions of law raised on these issues.

Cash Payment Noted in Seized Documents:
Regarding the addition on account of cash payment noted in seized documents, the Tribunal had remanded the matter to the assessing officer for fresh consideration. Subsequently, the assessing officer verified the books of accounts and deleted the entire deduction. As a result, the Court found no question of law arising on this issue and rejected it.

Conclusion:
The High Court dismissed the revenue's appeal on the grounds that no substantial question of law arose for consideration in the case. The connected application was also dismissed. The judgment provided a detailed analysis of each issue raised by the revenue, ultimately upholding the findings of the Tribunal and CIT(A) on various aspects related to the assessment years in question.