2023 (6) TMI 803 - AT - Income Tax

Undisclosed investment (Interest) - interest has been disallowed by the CIT(A) on the grounds that unaccounted interest was computed by the revenue authorities on assumption basis - HELD THAT - On going through the entire contents, since no amount receivable could deciphered, we decline to interfere with the reasoned order of the ld. CIT(A) on this issue. Undisclosed Receipts - revenue authorities determined unaccounted profit on Meerut project and Jaipur project - sole basis for making the addition was the letter written by the marketing head after leaving the job from the assessee company wherein marketing head had sought the sales incentives @ 1% - HELD THAT - As the revenue authorities have accepted the total amount of booking received of Rs. 31.97 Cr. till 2009 whereas as per the letter of Ex. Marketing Head, the sale figure has been considered as Rs. 60 Cr. for determination of profits. Similarly, the revenue has accepted the total booking of Rs.70.29 Cr. towards the sale whereas for determination of the profits, the projection as mentioned by Ex. Marketing Head of Rs. 279 Cr. has been considered. While considering the letter of Ex. Marketing Head for determination of sales to the tune of Rs. 279 Cr. and working out the profits/undisclosed income consequently, while doing so, the revenue has not even recorded the statement of Ex. Marketing Head and confronted the same to the Principle Officer of the company. Appeals of the revenue are dismissed.

Summary

Issues Involved:
1. Undisclosed Investment
2. Undisclosed Receipts

Detailed Analysis:

Undisclosed Investment:
The Revenue raised an issue regarding the deletion of an addition of Rs. 1,80,000/- made by the Assessing Officer (AO) on account of undisclosed investment. A search and seizure operation conducted under section 132 of the Income Tax Act, 1961, led to the discovery of a diary with coded entries. The AO interpreted these entries as financial transactions and added the amount to the assessee's income, arguing that the assessee failed to explain or correlate these entries with their regular books of accounts.

The CIT(A) deleted this addition, reasoning that the entries in the diary were unintelligible and lacked corroborative evidence. The CIT(A) emphasized that mere jottings on a diary, without any supporting evidence, do not constitute sufficient grounds for addition. The Tribunal upheld the CIT(A)'s decision, stating that the addition was based on conjecture and surmises, and there was no tangible evidence to support the AO's interpretation of the diary entries.

Undisclosed Receipts:
The second issue raised by the Revenue was the deletion of an addition of Rs. 15,02,88,986/- made by the AO on account of undisclosed receipts. This addition was based on a letter dated January 3, 2009, written by a former employee, Sh. Abdul Bari, who claimed sales incentives based on estimated sales figures. The AO used these estimated figures to calculate the total sales and profits for the assessee's projects in Meerut and Jaipur.

The CIT(A) found that the AO's calculations were based on estimates and projections rather than actual sales figures. The CIT(A) noted that the letter from Sh. Abdul Bari was written by an aggrieved employee and could not be taken as conclusive evidence of actual sales. The Tribunal agreed with the CIT(A), stating that the AO's addition was based on conjecture and lacked corroborative evidence. The Tribunal emphasized that the AO did not conduct further investigations or corroborate the estimated figures with actual sales data.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue, upholding the CIT(A)'s decision to delete the additions made on account of undisclosed investment and undisclosed receipts. The Tribunal found that the AO's additions were based on conjecture, surmises, and estimates without any tangible or corroborative evidence.