2024 (12) TMI 689 - AT - Income Tax

Unexplained income relates to the HUF - assessee has failed to establish during the course of assessment proceedings that the unexplained income relates to the HUF whereas the AO established the same as relating to the assessee - HELD THAT - As clearly been mentioned on the top Projected profile , and even the area as per seized agreement having an area of 9.34 acres have been mentioned which tallies with the agreement as seized and even it has clearly been mentioned that Prop. is planning to set up a PUDA approved colony and no corroborated evidence have been found during survey that the assessee having received any amount from the prospective buyers and as per above facts as mentioned in Brief Synopsis, is clearly prove that such were rough projected figures and even a bare look at different pages as seized clearly demonstrate that these are not actual figures and besides that there are so many cuttings and no signatures of the concerned Chartered Accountant and the facts as mentioned in Brief Synopsis, proves the contention of the assessee. Reliance by assessee on the judgment of Ravi Kumar 2007 (7) TMI 45 - HIGH COURT, PUNJAB AND HARYANA is clearly applicable to the facts and circumstances of the case that in the absence of any evidence or any other corroborated evidence, no addition could be made in the hands of assessee. DR during the course of hearing has not been able to rebut the agreement of the Ld. Counsel either and, thus, we hold that the document as found belongs to Darshan Kumar HUF and the CIT(A) has rightly deleted the addition and even no adverse view could be drawn as these are only projected figures.

Summary

Issues Involved:

1. Whether the additions made by the Assessing Officer should be attributed to the individual or the Hindu Undivided Family (HUF).
2. Legality of the reopening of assessment under Section 148 of the Income Tax Act.
3. Validity of the documents found during the survey as evidence of unexplained income.

Detailed Analysis:

1. Attribution of Additions to Individual or HUF:

The primary issue in this case was whether the unexplained income should be attributed to the individual or the HUF. The department contended that the impugned additions should be considered as the income of the individual, arguing that the impounded documents clearly indicated the unexplained entries related to the individual. However, the CIT(A) held that the unexplained income was attributable to the HUF, as the documents and agreements found during the survey indicated the involvement of the HUF in the transactions. The Tribunal agreed with the CIT(A), noting that substantive additions had already been made in the hands of the HUF, and the agreements found during the survey explicitly mentioned the HUF. Therefore, the Tribunal upheld the CIT(A)'s decision to attribute the unexplained income to the HUF, dismissing the department's appeal.

2. Legality of Reopening under Section 148:

The assessee raised cross-objections challenging the reopening of the assessment under Section 148, arguing that it was illegal, invalid, and void ab-initio. The assessee contended that there was no application of mind at the time of reopening, and the proceedings were initiated based on conjectures and surmises rather than concrete reasons to believe. However, during the proceedings, the assessee withdrew the grounds related to the issuance of notice under Section 148. Consequently, the Tribunal did not adjudicate on these grounds, rendering them infructuous.

3. Validity of Documents as Evidence:

The department argued that the documents found during the survey, which included projected balance sheets and profit and loss accounts, were evidence of unexplained advances and additions to the capital account. The assessee countered this by asserting that these documents were merely projected figures prepared for the purpose of obtaining financial borrowings and did not represent actual transactions. The Tribunal examined the documents and noted that they were rough drafts with numerous cuttings and lacked signatures, indicating they were not finalized or actual figures. The Tribunal agreed with the assessee's contention, supported by the jurisdictional High Court's judgment in a similar case, that in the absence of corroborated evidence, no addition could be made based on these projected figures. Thus, the Tribunal upheld the CIT(A)'s decision to delete the additions based on these documents.

Conclusion:

The appeal by the department was dismissed, as the Tribunal found no merit in the arguments presented against the CIT(A)'s decision. The cross-objections by the assessee became infructuous due to the withdrawal of certain grounds. The Tribunal's judgment emphasized the importance of concrete evidence in attributing unexplained income and the need for due process in reopening assessments.