2003 (1) TMI 268 - AT - Income Tax

Summary

Issues:
- Appeals against orders of CIT(A) for asst. yrs. 1988-89 and 1989-90 objecting additions made under s. 69C of the IT Act.
- Discrepancy in salaries paid to expatriate employees as per pay slips found and salary details shown by assessee.
- Justification of additions made by AO under s. 69 of the IT Act.
- Relevance of documentary material found elsewhere in assessment proceedings.
- Failure to confront seized material found from third party with the assessee.
- Request for relevant records by the assessee and non-production by the Department.
- Adverse inference without confronting material found.
- Accounting for salaries in regular books of accounts without defects pointed out by AO.

Analysis:
1. The appeals were filed by the assessee against the orders of CIT(A) for the assessment years 1988-89 and 1989-90, contesting the additions made under section 69C of the IT Act. The AO had noted a significant difference in the salaries paid to expatriate employees as per pay slips found during a search operation and the salary details provided by the assessee.

2. The AO, after considering explanations from the assessee, concluded that unrecorded salaries should be added to the income under s. 69C. The CIT(A) upheld the AO's decision, emphasizing the relevance of documentary material found elsewhere in the assessment process. The assessee argued that without confronting the material found from the third party, no adverse inference should be drawn.

3. The Tribunal found that the relevant records were not produced before them despite multiple opportunities granted to the Department. The assessee had repeatedly requested access to the seized material but was not provided with the same. The Tribunal held that without confronting the material relied upon by the AO, no additions could be justified.

4. Additionally, the Tribunal noted that all salaries paid by the assessee were properly accounted for in the regular books of accounts without any defects highlighted by the AO. Therefore, the Tribunal concluded that the CIT(A) was not justified in sustaining the additions made by the AO for both years, leading to the deletion of both additions and allowing the appeals of the assessee.