2018 (6) TMI 277 - AT - Income Tax

Unaccounted investment - addition based on entries recorded in the diaries seized - addition proposed by Spl. Auditor - Held that - Even though assessee explained that the transactions pertain to the firm, the same seems to have been not examined properly by the AO or by the CIT(A). On the addition proposed by Spl. Auditor the transactions were reportedly by cheque and as clearing (clg) is mentioned, it is easy to verify the said transactions with reference to the corresponding bank entries, either in assessee s bank pass book or in the firm s bank accounts. This exercise has not been done and amount of ₹ 3,03,455/- has been added in the assessee s hands ignoring the assessee s explanation. When assessee explained that amount of ₹ 9 Lakhs was meant for purchase of cement that can be verified from the books of the firm, which was in the construction activity. The diary being maintained in Telugu. The same could have been analysed and examined to see whether the contentions of assessee are correct or not. Since this exercise was not been undertaken by the AO or by the Ld.CIT(A), who could not read Telugu, we are of the opinion that the issue can be re-examined by the AO after giving due opportunity to assessee to explain the transactions vis- -vis the books maintained by assessee or in the firm s hands - Appeal of assessee is allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Addition of unaccounted investment.
3. Confirmation of additions made by the Assessing Officer.

Analysis:
1. Condonation of Delay:
The appeal was filed with a delay of 381 days due to oversight in preferring the appeal. The assessee explained that the delay was unintentional and requested condonation. The Tribunal, after considering the reasons for delay, held that there was sufficient cause for the delay and admitted the appeal for hearing.

2. Addition of Unaccounted Investment:
The Assessing Officer made additions totaling ?33,62,633, including ?3,03,455 as unexplained investment based on a special auditor's report. The assessee contended that these transactions were accounted for by the firm and explained them post-search. However, the CIT(A) did not accept the explanation, leading to the confirmation of the addition. The Tribunal noted that the transactions were not properly examined and directed the AO to reevaluate the addition of ?3,03,455.

3. Confirmation of Additions by CIT(A):
Regarding the addition based on entries in seized diaries, the CIT(A) confirmed ?17,15,733 as unaccounted receipt, while allowing ?16,46,900 as utilization of unaccounted receipts out of the total addition. The assessee argued that all transactions were explained post-search and should have been considered in the correct perspective. The Tribunal observed that the transactions were not adequately examined by the AO or CIT(A) and directed a fresh examination by the AO, emphasizing the need to verify the source of funds and examine the diary entries for accuracy.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the orders of the AO and CIT(A) and restoring the issues of ?3,03,455 and ?17,15,733 for fresh examination by the AO.