2003 (10) TMI 283 - AT - Income Tax

Addition u/s 68 - search proceedings - surrendered an amount during the search - HELD THAT - The addition was contested in appellate stage. The fact that the assessee has offered the income is admittedly taken into account. Therefore, it was open to the assessee at the stage of assessment to establish that surrender made at the time of search proceedings was the compulsion and not with free mind or that the addition is not warranted on the basis of available material. Considering the facts and circumstances of the case, I am of the opinion that the addition made by the AO should be considered on merits rather than the surrender made by the assessee in the search proceedings. Coming to the merits of the addition, it is seen that the assessee has been able to substantiate that the difference as found out is the result of rate difference and this fact has not been refuted either by the AO or by the CIT(A) who have gone only on the sole ground of surrender made during the search proceedings. Therefore, I do not find any justification in making the addition, which is directed to be deleted. As a result, the appeal of the assessee gets accepted.

Summary

Issues involved: Appeal against order of CIT(A)-II Jodhpur for asst. yr. 1989-90. Grounds include sustaining addition of Rs. 33,480, failure to give findings based on material, and scope of appeal.

Issue 1 - Addition of Rs. 33,480:
The case involved a search at the assessee's premises where entries of transactions were found, leading to the assessee surrendering Rs. 33,480. The AO made the assessment based on this surrender, despite the assessee later explaining the entries. The CIT(A) directed further examination by the AO due to the assessee retracting the surrender. The AO, however, maintained the addition citing the partner's surrender statement. The assessee argued that all entries were explained with reference to account books, presenting a chart to support this claim. The CIT(A) upheld the AO's action, prompting the assessee to appeal again.

Issue 2 - Failure to give findings based on material:
The assessee contended that the AO's action was incorrect as all entries were explained and related to rate differences. Citing a Tribunal decision, the assessee argued that the addition was unjustified since the rate difference was clarified. The Departmental Representative argued that the surrender was not voluntary, justifying the addition. The ITAT, after considering the submissions and precedent, found that the addition should be evaluated on merits rather than solely based on the surrender. It noted that the assessee substantiated the rate difference, which was not refuted by the AO or CIT(A). Consequently, the ITAT ruled in favor of the assessee, directing the deletion of the addition.

Conclusion:
The ITAT accepted the appeal, emphasizing the need to assess additions on their merits rather than solely relying on surrenders made during search proceedings. The decision highlighted the importance of substantiating claims and considering all available evidence in such cases.