2015 (8) TMI 706 - AT - Income Tax

Estimation of 8% profit on disclosed contract receipts - additional income on account of entries found in the diary seized in the search of Mr.Ashok Kumar Chowta - Held that - As far as disclosed contract receipts in the books of account are concerned, as already stated, the addition was made only on the basis of statement recorded at the time of survey. The books of account have not been rejected by the AO u/s. 145 of the Act. In such circumstances, we are of the view that the estimation of profits at 8% of the contract receipts disclosed in the books of account cannot be sustained. The profits disclosed by the assessee as per the books of account in respect of disclosed contract receipts for AY 2005-06, 2006-07 & 2007-08 should be accepted as declared by the assessee. We may also add that neither the AO nor the CIT(Appeals) have given any reason for making the aforesaid addition. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 147 for AYs 2004-05 to 2008-09.
2. Appropriateness of CIT(A)'s deletion of addition of 8% of undisclosed contract receipts based on seized documents.
3. Justification of CIT(A) sustaining addition at 1.5% of cash payments found in the seized diary.
4. Validity of CIT(A)'s deletion of addition on account of unexplained investment in properties for AY 2007-08.

Issue-wise Detailed Analysis:

1. Validity of reassessment proceedings under Section 147 for AYs 2004-05 to 2008-09:
The Tribunal framed the issue to determine if the initiation of reassessment proceedings under Section 147 was valid. The Tribunal did not explicitly address this issue in the provided text, focusing instead on the substantive matters of income estimation and additions.

2. Appropriateness of CIT(A)'s deletion of addition of 8% of undisclosed contract receipts based on seized documents:
The Tribunal found that the estimation of profits at 8% was made purely on the basis of a statement recorded at the time of the survey, which was deemed a conditional statement and not a reliable basis for assessment. The Tribunal concluded that the Revenue failed to corroborate its conclusion that the entries in the seized diary were unaccounted contract receipts of the assessee. The Tribunal upheld the CIT(A)'s decision to delete the addition of 8% of the receipts as found in the seized diary.

3. Justification of CIT(A) sustaining addition at 1.5% of cash payments found in the seized diary:
The Tribunal held that the CIT(A)'s decision to sustain the addition at 1.5% of the cash payments recorded in the seized diary was without any basis. The Tribunal noted that there was no statement admitting any other income and that the CIT(A)'s conclusion was based on a non-existent admission of other incomes not declared. Therefore, the Tribunal allowed the relevant grounds of the assessee and dismissed the Revenue's appeals on this aspect.

4. Validity of CIT(A)'s deletion of addition on account of unexplained investment in properties for AY 2007-08:
The Tribunal did not provide a detailed analysis of this issue in the provided text. However, it can be inferred that the Tribunal's focus was on the estimation of profits and the basis for additions rather than specific investments in properties.

Additional Observations:
The Tribunal noted that the books of account had not been rejected by the AO under Section 145 of the Act, and the addition was made solely based on the statement recorded at the time of the survey. The Tribunal held that the estimation of profits at 8% of the contract receipts disclosed in the books of account could not be sustained and that the profits disclosed by the assessee should be accepted as declared. The Tribunal emphasized that neither the AO nor the CIT(A) provided any reason for the addition.

Conclusion:
The miscellaneous petitions of the assessee were allowed, and the Tribunal pronounced the judgment in the open court on August 7, 2015.

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