2017 (5) TMI 639 - SC - Income Tax

Interest income - undisclosed income - addition based on seized documents - full value of the pronotes seized at the time of survey should have been taken into account and not 30% - Held that - From the order of the first appellate authority, we find that the Assessing Officer had examined some of the borrowers mentioned in the pronotes and they have categorically stated that the amount advanced is 50 per cent. or less which explanation has been accepted by the first appellate authority and confirmed by the Tribunal. The Department has failed to bring on record any material to the contrary except the seized documents which, in our considered opinion, could not absolve the Department or give any right to negate the view taken by the first appellate authority and the Tribunal. So far as the income divided among the family members of the respondent-assessee is concerned, we find that all of them were carrying on same business from the same premises. Therefore, it is but natural that if any concealed income has been found at the time of search and survey, it has to be distributed among all the family members who were carrying on business. Thus the impugned order of the High Court 2005 (12) TMI 85 - MADRAS High Court does not call for any interference.

Summary

Issues:
1. Interpretation of income tax law - substantial question of law.
2. Assessment of undisclosed income based on seized documents.
3. Distribution of concealed income among family members in a business.

Analysis:
1. The Supreme Court examined the appeal challenging the High Court's order dismissing the appeal under section 260A of the Income-tax Act, 1961 on the basis that no substantial question of law was raised. The appellant argued that the full value of pronotes seized during a survey should have been considered, rather than only 30% of the face value as disclosed income. However, the Court found that the Assessing Officer had already examined borrowers mentioned in the pronotes, who confirmed that the amount advanced was 50% or less. This explanation was accepted by the first appellate authority and upheld by the Tribunal.

2. The Court noted that the Department failed to provide any material contrary to the seized documents. The Court opined that the seized documents were insufficient to challenge the decisions of the first appellate authority and the Tribunal. Additionally, the Court highlighted that since all family members were involved in the same business from the same premises, any concealed income found during the search and survey should be distributed among all family members conducting the business. Therefore, the Court concluded that the High Court's order did not warrant interference, leading to the dismissal of the appeal.

3. The Court decided not to award costs and disposed of any pending applications. The judgment emphasized the importance of considering all relevant evidence and legal aspects in determining undisclosed income and its distribution among family members involved in a shared business.