2019 (3) TMI 63 - HC - Income Tax

Estimation of income arising out of the activities of the club on the higher side - estimation of daily collection - Tribunal reduced the gross income of the assessee - statements given at the time of search u/s. 132(4) - HELD THAT - The Tribunal, as noted, scaled down the daily collection to ₹ 50000/- taking a mean and also granted further relief for the holidays and adjustment for inflation for the past period. The entire issue is based on appreciation of evident on record. We do not find that the concurrent findings of the CIT(A) and the Tribunal in the context of estimation of the club s daily collection suffers from any perversity. The view of the Tribunal that the daily collection cannot be spread over all 365 days in an year, was also perfectly valid. When the Tribunal was further spreading such collection rate for a span of six years going backwards, and thus, applying the method of interpolation, adjustment for inflation had to be made and therefore, correctly applied by the Tribunal. Telescopic benefit of income earned in previous year to cash and jewellery found - HELD THAT - Since the additions were made on estimation for the entire period, the Tribunal was of the opinion that further additions under different heads were not necessary. We do dot find any error in view of the Tribunal. No question of law, therefore, arises.

Summary

Issues:
1. Estimation of income arising from the activities of the club.
2. Granting telescopic benefit of income earned in a previous year to cash and jewellery found during search.

Analysis:
1. The appeals involved two assessees linked to an entertainment club providing gambling facilities. The Revenue contended that both assessees were active partners in the business. Assessments were conducted based on incriminating material seized during a search operation, employee statements, and revenue estimations. The Assessing Officer calculated the net income of the business at ?1 Lac per day, divided equally between the assessees for multiple assessment years. The CIT(A) provided relief by accepting a daily collection figure of ?55,000 and granting a 50% deduction for expenses. The Tribunal further reduced the daily collection to ?50,000, accounting for holidays and inflation adjustments, leading to two sets of appeals by the Revenue.

2. Regarding the first issue, both the CIT(A) and the Tribunal found the Assessing Officer's income estimate to be on the higher side. The Tribunal's decision to scale down the daily collection to ?50,000, considering holidays and inflation adjustments, was upheld. The Tribunal's method of interpolation for spreading the collection rate over six years was deemed valid, with no perversity found in the concurrent findings. The Tribunal's approach was considered reasonable, and no question of law was identified.

3. Concerning the second issue, the Revenue challenged the Tribunal's decision to grant telescoping benefit to the assessee. The Tribunal, having made additions based on estimations for the entire period, deemed further additions unnecessary under different heads. The Tribunal's stance was upheld as correct, with no error identified in its decision. Consequently, no question of law arose, leading to the dismissal of all appeals.

In conclusion, the High Court upheld the Tribunal's decisions, finding no legal issues in the estimation of income from the club's activities or the granting of telescopic benefit to the assessee. All appeals were dismissed based on the comprehensive analysis of the facts and legal principles involved in the case.