2022 (4) TMI 26 - AT - Income Tax

Assessment u/s 153A - assessee has failed to substantiate his claim with necessary evidences, including books of account to reconcile undisclosed income determined by the Assessing Officer on the basis of net worth method - AO computed undisclosed income on the basis of net worth method, when the assessee has failed to produce necessary books of account and other details to reconcile various incriminating materials found during the course of search - CIT(A) rejected books of account on the ground that same were reconstructed after date of search and said finding appears to be reasonable - HELD THAT - When the assessee has filed reconciliation explaining difference in undisclosed income computed by the AO when compared to undisclosed income returned by the assessee with certain explanation, then the CIT(A) ought to have been entertained arguments of the assessee. In this case, CIT(A) has summarily rejected arguments of the assessee and sustained additions made by the assessee towards undisclosed income on net worth method. Assessee should get one more opportunity before lower authorities to explain his case - DR vehemently argued and requested to set aside appeals to the CIT(A) to re-examine claim of the assessee. Considering complexity involved in the case, we deem it appropriate to set aside appeals of the assessee to the file of the learned CIT(A) and direct the CIT(A) to reconsider the issues afresh in light of various additional evidences filed by the assessee, including reconciliation filed for explaining undisclosed income computed by the AO - Appeal filed by the assessee for the assessment year 2009-10 is treated as allowed for statistical purposes.

Summary

Issues Involved:
- Appeal against orders of Commissioner of Income Tax (Appeals) for multiple assessment years.
- Challenge to additions made towards undisclosed income based on net worth method.
- Failure to consider reconciliation filed by the assessee.
- Request for setting aside the appeals for reconsideration by lower authorities.

Analysis:

1. Challenge to Additions Based on Net Worth Method:
The appeals were filed against orders of the Commissioner of Income Tax (Appeals) for various assessment years, challenging the additions made towards undisclosed income using the net worth method. The Assessing Officer computed undisclosed income based on this method due to the assessee's failure to produce necessary books of account and details to reconcile incriminating materials found during a search operation. The appellant argued that certain assets acquired before the relevant assessment year were considered erroneously, and reconciliation was provided to explain the differences. The Commissioner upheld the additions, stating that the appellant failed to substantiate claims with sufficient evidence, including books of account.

2. Failure to Consider Reconciliation:
The appellant contended that the Commissioner erred in not considering the reconciliation filed to explain the undisclosed income computed by the Assessing Officer. The appellant reconstructed books of account post-search and provided explanations for the differences in undisclosed income. Despite this, the Commissioner summarily rejected the arguments and sustained the additions. The Tribunal found that the Commissioner should have entertained the appellant's arguments and considered the reconciliation provided. Therefore, the appeals were set aside to provide the appellant with another opportunity to explain the case before the lower authorities.

3. Reconsideration by Lower Authorities:
Considering the complexity of the case and the need to provide the appellant with a fair opportunity to present their case, the Tribunal directed the appeals to be sent back to the file of the Commissioner of Income Tax (Appeals). The lower authority was instructed to reconsider the issues afresh in light of additional evidence submitted by the appellant, including the reconciliation for the undisclosed income computed by the Assessing Officer. The Tribunal emphasized the importance of giving the appellant another chance to present their case effectively.

In conclusion, the Tribunal allowed the appeals for statistical purposes and directed the lower authorities to re-examine the issues, provide a fair hearing to the appellant, and consider the additional evidence presented during the proceedings.