2015 (9) TMI 441 - AT - Income Tax

Addition on account of peak credit/investment - whether the addition is duly covered in the declaration and other addition made by the Assessing Officer in the assessment order and this sustaining amounts to taxing the same amount twice? - Held that - Since nothing has been brought before the lower authorities as well as before us that the statement given during the course of search was on wrong assumption of facts or that the statement given during the course of search is untrue or false, therefore, we do not find any merit in the arguments of the Ld. Counsel for the assessee that addition of the same will amount to double taxation. However, as already mentioned earlier, the AO himself has noted in para 4.8 of his order that debtors to extent of ₹ 10,76,176/- relates to the unaccounted business as evidenced by Bundle No.4, therefore, the assessee is entitled to relief of only ₹ 10,76,176/- out of the addition of ₹ 28 lakhs made by the AO on the basis of the admission of the assessee during the course of search being peak investment in unrecorded transactions in purchases and sales. - Decided partly in favour of assessee. Addition of ₹ 1 lakh on adhoc basis out of various expenses as were not fully verifiable with supporting vouchers - Held that - No infirmity in the above disallowance since the assessee himself by agreeing for addition of ₹ 1 lakh prevented the AO from making further enquiries. Therefore, the CIT(A) was fully justified in not accepting the various additional evidences in the form of bills and vouchers. Merely because books of accounts are duly audited u/s.44AB, the same, in our opinion, is not sufficient to delete the addition especially when the AO had pointed out that the expenses are not supported by proper vouchers and the assessee himself has agreed for addition of ₹ 1 lakh and prevented the AO from making further enquiries. Under these circumstances the order of the CIT(A) is upheld - Decided against assessee.

Summary

Issues Involved:
1. Sustaining the addition of Rs. 28,00,000 on account of peak credit/investment.
2. Sustaining the adhoc addition of Rs. 1,00,000 relying upon the admission made by the appellant.

Detailed Analysis:

1. Sustaining the Addition of Rs. 28,00,000 on Account of Peak Credit/Investment:

The assessee, engaged in the business of wholesaler of Kirana and Bhusar, was subjected to a search and seizure action under section 132 and a survey action under section 133A of the Income Tax Act. During the search, cash amounting to Rs. 45,92,723 was found, whereas the books recorded only Rs. 88,944, leading to an undisclosed amount of Rs. 45,03,779. The assessee accepted the undisclosed cash of Rs. 45,00,484. Additionally, excess stock of Rs. 1,44,663 was found during the survey, leading to an addition of Rs. 44,663 as undisclosed income.

The AO also discovered unrecorded purchases and sales from seized documents, and the assessee admitted to unaccounted transactions involving approximately Rs. 25 to 30 lakhs, offering Rs. 28 lakhs as undisclosed income. However, the assessee did not include this Rs. 28 lakhs in the return filed in response to notice under section 153A, leading the AO to add this amount to the total income.

The CIT(A) upheld this addition, emphasizing the evidentiary value of the statement recorded under section 132(4) and noting that the assessee failed to provide concrete evidence to contradict the statement given during the search.

Before the Tribunal, the assessee argued that the addition of Rs. 28 lakhs would result in double taxation, as the same was covered by the excess cash of Rs. 45,00,484 and unaccounted debtors of Rs. 18,11,873. However, the Tribunal found no merit in this argument, noting that the assessee was engaged in both accounted and unaccounted business. The Tribunal sustained the addition of Rs. 17,23,824, providing relief of Rs. 10,76,176, which was part of the unrecorded credit sales admitted by the assessee.

2. Sustaining the Adhoc Addition of Rs. 1,00,000:

The AO made an adhoc addition of Rs. 1 lakh on account of unverifiable expenses, which the assessee had agreed to. The CIT(A) upheld this addition, noting that the assessee's agreement prevented the AO from making further inquiries. The Tribunal found no infirmity in the CIT(A)'s decision, emphasizing that the assessee's consent to the addition and the lack of supporting vouchers justified the addition.

Conclusion:

The Tribunal partly allowed the appeal, sustaining an addition of Rs. 17,23,824 out of the Rs. 28 lakhs and upholding the adhoc addition of Rs. 1 lakh. The order was pronounced in the open court on 26-08-2015.