2020 (6) TMI 635 - HC - Income Tax

Undisclosed income of the block period u/s 158BB - Sale of Naphtha in open market - Unaccounted sale consideration - seized material and statement recorded u/s 131 which established that the assessee sold in open market the Naphtha products at hefty cash premium and part of which unaccounted sale consideration routed back in the books through accommodation entries - addition on account of sale and delivery orders - Addition on protective basis merely relying on the statement of Naresh B. Vora recorded by the Assessing Officer that the assessee was working on behalf of several parties in Ahmedabad and Baroda - Addition of foreign tour expenses on the basis of evidence which was gathered - addition of household expenses on entry found in one Gandhi diary in the premises of Sunil Chemicals - ITAT deleted all the addition HELD THAT - Section 158BC requires the Assessment Officer to determine the undisclosed income of the block period in the manner provided under Section 158BB. While determining / computing the undisclosed income of the block period, the Assessing Officer shall compute the income on the basis of evidence found as a result of search or on requisition of books of accounts. This is so because the correctness or otherwise of the return filed in pursuance of notice under Section 158BC (a) has to be examined with reference to the materials in possession of the Assessing Officer having nexus to the assessment of undisclosed income. Hence block assessment has to be framed in the light of material coming in to the possession of the assessing authority pursuant to the search, which is the foundation of the proceedings. On a thorough consideration, we have no reason to believe that the above findings are otherwise incorrect or improper. From the above, it is clear that the findings returned by the Tribunal in respect of the five deletions exhibit due application of mind on the part of the Tribunal and on the basis of the factual evidence on record. We do not find any perversity, much less any ambiguity, in the findings returned by the Tribunal. We find that the CIT (A) has dealt with the related issues in great detail which have been affirmed by the Tribunal. Thus, there is concurrent findings of fact by the two lower appellate authorities. We are in agreement with the reasons recorded by the Tribunal in respect of deletion of the five additions made by the CIT (A) and upheld by the Tribunal. Appeal filed by the revenue is devoid of merit and the same is liable to be dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of sale of Naphtha.
2. Deletion of addition on account of sale of delivery orders purchased from M/s Reliance Industries Ltd.
3. Deletion of addition made on protective basis.
4. Deletion of addition on account of foreign tour expenses.
5. Deletion of addition on account of household expenses.

Detailed Analysis:

1. Deletion of Addition on Account of Sale of Naphtha:
The Revenue questioned whether the Tribunal was correct in deleting the addition made based on the sale of Naphtha, ignoring the seized material and statements recorded under Section 131 of the Income Tax Act, 1961. The Assessing Officer had added ?12,48,61,834.00 to the income of the assessee based on the statement of Mr. Naresh B. Vora, which alleged that the assessee was involved in the sale of Naphtha at a hefty cash premium. The CIT (A) deleted this addition, stating that no incriminating material was found during the search to suggest the assessee's involvement in the Naphtha business. The Tribunal upheld the CIT (A)'s decision, noting that the addition was based solely on Mr. Vora's statement without any corroborative evidence.

2. Deletion of Addition on Account of Sale of Delivery Orders Purchased from M/s Reliance Industries Ltd.:
The Revenue contended that the Tribunal erred in deleting the addition of ?36,38,634.00 made on account of sale and delivery orders. The Assessing Officer had based this addition on a file containing bills of Reliance Industries Ltd. and the name "Sunil Bhai" appearing on two bills. The CIT (A) deleted this addition, stating that there was no direct evidence linking the assessee to the transactions. The Tribunal agreed, noting that the appearance of the name "Sunil Bhai" on the bills was insufficient to prove the assessee's involvement.

3. Deletion of Addition Made on Protective Basis:
The Revenue challenged the deletion of ?4,99,36,298.00 made on a protective basis. The Assessing Officer had made this addition based on the statement of Mr. Naresh B. Vora, which suggested that the assessee was working on behalf of several parties in Ahmedabad and Baroda. The CIT (A) deleted this addition, stating that there was no direct evidence linking the assessee to these parties. The Tribunal upheld the CIT (A)'s decision, noting that the addition was made without any specific evidence.

4. Deletion of Addition on Account of Foreign Tour Expenses:
The Revenue questioned the deletion of ?2,00,000.00 added for foreign tour expenses. The Assessing Officer had made this addition without any incriminating documents found during the search. The CIT (A) deleted this addition, stating that there was no evidence to prove that the assessee had spent this amount on foreign trips. The Tribunal agreed, noting that the Revenue failed to provide any material evidence linking the foreign travel expenses to the assessee.

5. Deletion of Addition on Account of Household Expenses:
The Revenue contended that the Tribunal erred in deleting the addition of ?21,83,010.00 made for household expenses. The Assessing Officer had based this addition on entries found in a Gandhi diary seized from the premises of "Sunil Chemicals." The CIT (A) deleted this addition, stating that there was no evidence proving that the withdrawals were made by the assessee or his family members. The Tribunal upheld this decision, noting that the diary was not in the handwriting of the assessee or his family members and that the addition was made based on conjecture and surmise.

Conclusion:
The High Court dismissed the Revenue's appeal, stating that no substantial question of law arose from the Tribunal's order. The Court found that the Tribunal had thoroughly examined the evidence and upheld the CIT (A)'s deletions based on a detailed analysis of the facts and materials on record. The Court agreed with the concurrent findings of the CIT (A) and the Tribunal, noting that the findings were not perverse or unsustainable.