2016 (7) TMI 530 - HC - Income Tax

Addition on account of suppressed sales - Addition on unexplained cash credit - ITAT allowed the claim - Held that - As is apparent from the facts noted hereinabove, it is an admitted position that during the course of search no material had been found to show any undisclosed income of the assessee. No evidence had been found to indicate that assessee had realized sale consideration other than that recorded in its books of accounts. For the purpose of holding that the assessee had sold goods to fictitious parties at a price 25% higher than that shown in the bills, the Assessing Officer had mainly placed reliance upon the statement of Shri Mahendra H. Shah recorded under Section 132 (4) of the Act. However, as noted hereinabove, Shri Mahendra H. Shah had not specifically mentioned the name of assessee. Thus, no material had been found at the time of search to indicate that the assessee had sold goods at a price higher than that recorded in the books of accounts regularly maintained by it. In the circumstances, the Tribunal was justified in holding that in the facts and circumstances of the case the provisions of Chapter XIVB of the Act could not have been resorted to as block assessment cannot take place of regular assessment. See Sachdeva Steel Products case 2010 (9) TMI 1173 - GUJARAT HIGH COURT In light of the above discussion, it is not possible to state that the Tribunal has committed any legal error so as to warrant interference - Decided in favour of assessee

Summary

Issues:
1. Challenge to the order of the ITAT regarding suppressed sales.
2. Challenge to the order of the ITAT regarding unexplained cash credit.

Analysis:
1. The appellant Department challenged the ITAT's order regarding suppressed sales and unexplained cash credit. The ITAT decided three appeals collectively, allowing one filed by the assessee and dismissing the other two filed by the Department. The Revenue further challenged the order related to another assessee, which was dismissed. The Tribunal noted that no material was found during the search indicating that the assessee realized more sale consideration than recorded. The addition of suppressed sales was based on estimates without concrete evidence. The Tribunal emphasized that block assessment cannot replace regular assessment without substantial evidence of undisclosed income. The Tribunal's decision was upheld, emphasizing the necessity of material discovered during the search for additions under section 158BD of the Act.

2. The ITAT's decision was based on the lack of evidence during the search to prove undisclosed income or inflated sales prices. The Assessing Officer's reliance on a statement without specific mention of the assessee was deemed insufficient to justify the additions. The Tribunal highlighted the importance of concrete material or information related to the search for block assessments under Chapter XIVB of the Act. As no substantial legal error was found in the Tribunal's decision, the appeal against the ITAT's order was dismissed. The judgment favored the assessee, emphasizing the need for concrete evidence to support additions in tax assessments.