2022 (9) TMI 38 - HC - Income Tax

Undisclosed profit and unaccounted investment in undervalued goods - survey action under section 133A - CIT-A deleted the addition also confirmed by ITAT - AO has made addition based on the information received from DRI - HELD THAT - AO has not mentioned any independent investigation carried out by him which leads to finding of making addition and further the Assessing Officer simply relied upon the information received from the Customs authority regarding the search action conducted by the officers of the DRI. It is held by both the authorities below that the Assessing Officer has committed an error by solely relying on information received from the customs authority and treated the undervaluation of the imported goods as unaccounted investment and thereby making peak addition on account of the same. Assessing Officer also made addition of Gross Profit by taking such unaccounted purchase as sale made by the assessee in cash without making any independent inquiry. It was observed by both the authorities that the Assessing Officer has solely relied upon the information from the Customs authority and statement of Pragnesh Jariwala - Director of the assessee-company made before DRI which was retracted later on. Tribunal has also considered the fact of the appeal being allowed by the Custom, Excise Service Tax Appellate Tribunal, Mumbai Bench in case of assessee holding that the allegation of undervaluation of imported goods was not established and therefore, directed the Customs Authority to grant the refund of customs duty collected by them. It was observed by the Tribunal that when the very basis on which the addition was made by the Assessing Officer stands deleted by the CESTAT in appeal preferred by the assessee, the addition based on their information does not survive and hence, the CIT(Appeals) has rightly deleted the addition on account of unaccounted investment and Gross profit. No substantial question of law. - Decided against revenue.

Issues:
1. Challenge to judgment and order passed by the Income Tax Appellate Tribunal for the assessment year 2008-2009.
2. Substantial questions of law proposed by the Revenue.
3. Addition made on account of undisclosed profit and unaccounted investment in undervalued goods.
4. Legal position regarding the onus to disprove a statement made by the assessee.
5. Deletion of additions made on account of unaccounted investment and gross profit.
6. Justification for dismissing the appeal of Revenue without considering all facts.

Analysis:

Issue 1: Challenge to Tribunal's Judgment
The Revenue challenged the judgment and order passed by the Income Tax Appellate Tribunal for the assessment year 2008-2009, questioning the additions made by the Assessing Officer. The Tribunal dismissed the appeal of the Revenue, leading to further legal scrutiny.

Issue 2: Substantial Questions of Law
The Revenue proposed several substantial questions of law, including the appreciation of undisclosed profit and unaccounted investment, the legal position on statements made by the assessee, and the justification for deletion of additions by the CIT(Appeals).

Issue 3: Undisclosed Profit and Unaccounted Investment
The Revenue contended that the Tribunal erred in not appreciating the addition made on account of undisclosed profit and unaccounted investment in undervalued goods. The Tribunal highlighted the importance of corroborating evidence and independent inquiries to substantiate such additions.

Issue 4: Onus to Disprove a Statement
The legal position regarding the onus on the assessee to disprove a statement was brought into question. The Tribunal considered previous legal precedents and emphasized the need for substantial corroboration of statements made by the assessee.

Issue 5: Deletion of Additions
The Tribunal upheld the deletion of additions made on account of unaccounted investment and gross profit. It found that the Assessing Officer had not conducted independent inquiries and solely relied on information from Customs Authorities, leading to the deletion of these additions by the CIT(Appeals).

Issue 6: Dismissal of Revenue's Appeal
The Tribunal justified the dismissal of the Revenue's appeal by considering the concurrent findings of fact by the lower authorities. It concluded that there was no infirmity in the impugned order and no substantial question of law arose from the case, leading to the dismissal of the Revenue's appeal.

Overall, the Tribunal's decision was based on the lack of independent inquiries by the Assessing Officer and the reliance on information from Customs Authorities without substantial corroboration. The legal principles regarding the burden of proof on the assessee and the need for independent evidence were crucial in the Tribunal's decision to delete the additions made by the Assessing Officer.

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