1999 (3) TMI 127 - AT - Income Tax

Summary

Issues Involved:
1. Presumption of suppressed sales for the period 1st Jan., 1986 to 2nd Nov., 1986 (Asst. yr. 1987-88).
2. Addition of Rs. 5,00,000 in FD with Mahavir Pat Sanstha on a protective basis.
3. Double addition of Rs. 2,64,644 for different years.

Issue-wise Detailed Analysis:

1. Presumption of Suppressed Sales for the Period 1st Jan., 1986 to 2nd Nov., 1986 (Asst. yr. 1987-88):
During a search and survey operation, it was discovered that the assessee-firm had been suppressing sales. The AO presumed that since sales were suppressed in the latter part of the assessment year 1987-88 and subsequent years, the sales must have been suppressed for the earlier period as well. Consequently, the AO estimated the sales and worked out the profit at Rs. 1,24,265 for the entire assessment year 1987-88.

The Tribunal highlighted that Chapter XIV-B provisions are special and specifically for assessing undisclosed income detected as a result of a search. The Tribunal referred to the case of Sunder Agencies, noting that assessments under Chapter XIV-B should be based on direct evidence resulting from the search, and not on presumptions. The Tribunal concluded that the addition made by the AO was based on presumption and not supported by cogent material and evidence. Therefore, it directed the AO to add profit only for the period from 4th Nov., 1986 to 31st Dec, 1986, resulting in a partial success for this ground.

2. Addition of Rs. 5,00,000 in FD with Mahavir Pat Sanstha on a Protective Basis:
During the search, FDRs worth Rs. 12 lakhs were found at the residence of an employee of the Kamat Group. The ownership of these FDRs was contested. Shri Girish M. Kamat admitted that the FDRs belonged to various concerns of the Kamat group, including the assessee-firm. The assessee-firm disclosed Rs. 5,00,000 as its undisclosed income. However, the AO assessed this amount on a protective basis, believing the entire Rs. 12 lakhs belonged to Shri Girish M. Kamat.

The Tribunal found that the FDRs aggregating to Rs. 12 lakhs did not belong solely to Shri Girish M. Kamat but to various concerns of the Kamat group, as evidenced by seized documents. The Tribunal held that since the assessee-firm had declared Rs. 5 lakhs as its undisclosed income, this amount should be assessed on a substantive basis in the hands of the assessee-firm. Thus, this ground succeeded.

3. Double Addition of Rs. 2,64,644 for Different Years:
The AO added Rs. 2,64,644 to the undisclosed income for different years, despite already calculating the undisclosed income for those years. This resulted in a double addition, which was admitted by the Departmental Representative.

The Tribunal recognized this as a clear instance of double addition and directed the deletion of the amount of Rs. 2,64,644. This ground also succeeded.

General Ground:
The appellant's general ground to add, alter, omit, or substitute any grounds at the time of hearing was noted as general in nature and required no comments.

Conclusion:
The appeal was allowed in part. The Tribunal directed the AO to make additions based on actual evidence and not presumptions, confirmed the substantive assessment of Rs. 5 lakhs as undisclosed income, and deleted the double addition of Rs. 2,64,644.