2023 (5) TMI 371 - SCH - Income Tax

Unexplained expenditure u/s 69C - actual consumption of diamonds as mentioned in the audit report and considering the consistent trend on yield which was found to be between 10-18% AO made the additions - High Court 2010 (2) TMI 636 - GUJARAT HIGH COURT has allowed the said Appeal preferred by the assessee - HELD THAT - As solely relying upon the statements of the Typist and the Chartered Accountant, the High Court has reversed the findings of the Assessing Officer as well as the ITAT. High Court has also not at all considered the conduct on the part of the assessee, which came to be considered in detail by the ITAT in para 10 of the order passed by the ITAT. As found that there has been search in the case of the assessee and its group concern on 07.01.1999 which was concluded on 23.03.1999 and during the course of the search, duplicate cash book, ledger and other books showing the unaccounted manufacturing and trading arrived at by the assessee in diamonds were found. ITAT has also noted that the huge addition was made in the case of assessee s group in the block assessment on the basis of the books so found. Therefore, it was found that the assessee was maintaining the books of accounts outside the regular books. The aforesaid has not at all been considered by the High Court, while passing the impugned order. Thus, the impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside - Decided in favour of revenue.

Summary

Issues Involved:
The issues involved in the judgment are related to the additions of unexplained expenditure under Section 69C of the Income Tax Act, 1961, based on the consumption of diamonds and yield percentage, and the reliance on affidavits to challenge the findings of the Assessing Officer and the ITAT.

Additions of Unexplained Expenditure under Section 69C:
The Assessing Officer made additions of Rs. 17,15,00,000/- as unexplained expenditure under Section 69C of the Act based on the actual consumption of diamonds and the consistent trend on yield. The CIT (Appeals) reversed the addition, but the ITAT upheld the addition after considering a remand order necessitated by affidavits. The High Court, however, solely relied on affidavits to set aside the ITAT's order, without considering the conduct of the assessee and its associates as scrutinized by the Assessing Officer and the ITAT.

Reliance on Affidavits and Conduct of Assessee:
The High Court's decision was based on the affidavits of the Typist and the Chartered Accountant, claiming a typographical error in the audit report regarding diamond consumption. However, the Assessing Officer's findings, affirmed by the ITAT, were not properly considered. The ITAT highlighted the search in the assessee's case revealing unaccounted manufacturing and trading of diamonds, leading to significant additions in the group's block assessment. The High Court failed to consider this crucial aspect while reversing the ITAT's decision.

Conclusion:
The Supreme Court quashed the High Court's judgment, reinstating the ITAT's order and the Assessment Order. The Court found the High Court's decision unsustainable due to its sole reliance on affidavits without considering the broader context of the case, including the conduct of the assessee and the findings of the Assessing Officer and the ITAT. As a result, the present Appeal was allowed without costs.