2009 (8) TMI 675 - HC - Income Tax

Income Tax Survey - The Assessing Officer disregarded the books of account produced by the assesese during the assessment proceedings under section 143(3) of the Act for the period after April 1, 1997 and other primary records solely on the ground that the assessee had made a confessional statement during the survey proceedings and voluntary payment of tax against the income from undisclosed sources surrendered during the survey proceedings. The primary evidence in the for of purchase bill was rejected on the ground that it was produced at the time of assessment after a considerable period and the retraction was after more than 3.5 months. The parties from whom goods were shown to be purchased and the donor in whose name entries were made in books of account confirmed the entries and verified the transaction, but the Assessing Officer disbelieved them on the ground that the donors were close relative of the assessee and the donation was made in cash. The Commissioner (Appeals) accepted the explanation offered by the assesee and the books of account filed with the return by the assessee as the entries in the books of accounts were supported by the primary evidence. The Commissioner (Appeals) also accepted the explanation that the statement were made by the assessee without understanding the import of the same as he was under stress due to suicidal death of his daughter. The Commissioner (Appeals) also considered the other aspect that the primary evidence produced by the assessee was also reflected in the sale tax return filed by the assessee, which were produced before the appellate authority. Held that - the findings of the fact recorded by the Commissioner (Appeals) and subsequently confirmed by the Tribunal in appeal were concurrent finding of fact and were not perverse. This orders were justified.

Issues Involved:
1. Justification of the Tribunal in endorsing the deletion of Rs. 6,33,753 made on account of excess cash found during the survey.
2. Justification of the Tribunal in upholding the deletion of Rs. 24,49,707 made by the Assessing Officer on account of excess stock found during the survey.
3. Whether the Tribunal's conclusions are vitiated by irrelevant considerations or prejudice.

Detailed Analysis:

1. Justification of the Tribunal in endorsing the deletion of Rs. 6,33,753 made on account of excess cash found during the survey:

The respondent-assessee filed a return for the assessment year 2000-01 declaring a total income of Rs. 1,52,250. During a survey under section 133A of the Income-tax Act, 1961, cash amounting to Rs. 7,18,028 was found, which the assessee admitted as undisclosed income. However, during the assessment proceedings, the assessee retracted his statement, citing mental disturbance due to his daughter's death and argued that the cash was part of regular business transactions and belonged to the Hindu undivided family. The Assessing Officer (AO) rejected this retraction, considering it an afterthought and made an addition of Rs. 6,33,753 towards cash found during the survey.

The Commissioner of Income-tax (Appeals) (CIT(A)) allowed the appeal, stating that the assessee's statement during the survey lacked corroborative evidence and could be retracted. The Tribunal upheld this decision, noting that the books of account produced by the assessee, which were prepared based on primary records, were not seriously defective. The Tribunal found the retraction bona fide and noted that the AO's rejection of the books of account was without basis.

2. Justification of the Tribunal in upholding the deletion of Rs. 24,49,707 made by the Assessing Officer on account of excess stock found during the survey:

During the survey, stock worth Rs. 37,06,697 was found, and the assessee offered Rs. 24,49,707 as undisclosed income. However, the assessee later argued that the stock was calculated without considering the transactions between April 1, 1997, and October 31, 1999. The AO did not accept this explanation and made an addition of Rs. 24,49,707 towards the value of excess stock.

The CIT(A) deleted this addition, stating that the statement made by the assessee during the survey was not corroborated by facts and circumstances. The Tribunal confirmed this decision, noting that the assessee's books of account, prepared based on primary records, were verified and no serious defects were found. The Tribunal also considered the assessee's explanation regarding the stock and found it reasonable.

3. Whether the Tribunal's conclusions are vitiated by irrelevant considerations or prejudice:

The AO disregarded the books of account produced by the assessee during the assessment proceedings under section 143(3), relying solely on the confessional statement made during the survey. The CIT(A) and the Tribunal found that the primary evidence, such as purchase bills and vouchers, were verified and confirmed by the parties involved. The Tribunal noted that the AO's rejection of the primary evidence was without basis and that the retraction of the statement was bona fide.

The Tribunal's findings were based on detailed verification of primary records and were not influenced by irrelevant considerations or prejudice. The Tribunal upheld the CIT(A)'s decision, which was based on the primary evidence produced by the assessee and duly verified by the AO.

Conclusion:

The High Court concluded that the findings of fact recorded by the CIT(A) and confirmed by the Tribunal were not perverse and were based on the primary evidence produced by the assessee. The substantial questions of law were decided in favor of the assessee and against the Revenue. The appeal was dismissed with no order as to costs.

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