2013 (12) TMI 472 - AT - Income Tax

Assessment u/s 153A Whether addition can be made on basis of certain notings made on loose sheets seized during search - Held that - AO should bring other cogent and corroborative evidence on record to establish that the notings in loose sheets actually represent undisclosed income - The assessee as well as Sri Jitender Kedia in their statements stated that an amount of Rs.2 crores was advanced to Sri Jitender Kedia for taking on lease M/s Kedia Alloys Pvt. Ltd., and as the deal did not work out Sri Jitender Kedia returned an amount of Rs.2.70 crores to the assessee and other partners of M/s Padmavati Ispat, along with other amounts spent - The addition was made on estimated basis and on assumptions without referring to the specific information in the seized material or any other material The AO has not given any specific logic on which basis he has computed the figure of Rs Rs.48,49,000/- Decided against Revenue.

Summary

Issues:
- Addition of Rs.48,90,000 as undisclosed income based on seized material.
- Justification of the CIT (A) in deleting the addition.
- Examination of the basis for the addition by AO.
- Consideration of statements and explanations provided by the assessee and another party involved.

Analysis:

The appeal before the Appellate Tribunal ITAT Hyderabad concerned the Revenue's challenge against the deletion of an addition of Rs.48,90,000 made by the Assessing Officer (AO) for the assessment year 2008-09. The AO concluded that the assessee had incurred sundry expenditure based on notings found during a search operation. The CIT (A) deleted the addition, prompting the Revenue's appeal.

The primary contention of the assessee was the lack of a clear basis provided by the AO for arriving at the figure of Rs.48,90,000 as sundry expenditure. The CIT (A) requested the AO to indicate the basis for the addition and provide copies of the seized material. Upon examination, the CIT (A) found that the AO had made the addition on an estimated basis without specific information from the seized material or any other source. The CIT (A) highlighted the absence of detailed reasons or findings for the addition, leading to its deletion.

During the proceedings, the Revenue argued that the seized materials indicated an amount due to the assessee, with a balance of Rs.49.80 lakhs added to income due to lack of explanation. In response, the assessee's representative explained that the addition was made without a connection to the seized material. The representative provided details of transactions involving a partnership firm and another party, emphasizing the lack of evidence supporting the expenditure incurred by the assessee.

The Tribunal observed that the AO had added the amount without a clear rationale, solely based on notings in seized material. The Tribunal emphasized the need for corroborative evidence to establish undisclosed income. Statements from the assessee and the other party involved indicated transactions related to a lease agreement, with no inconsistencies found. The Tribunal upheld the CIT (A)'s decision to delete the addition, citing the lack of substantial evidence supporting the AO's conclusion.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the addition of Rs.48,90,000 as undisclosed income, highlighting the importance of concrete evidence in such assessments.