2021 (8) TMI 364 - AT - Income Tax

Undisclosed receipts - search proceedings - During the course of search various loose papers were found and seized from the residential premises of the appellant - AO took in to consideration that the documents being represent the cash book prepared by the appellant himself in his own handwriting and observed that the assessee never provided working of these cash books neither explained the contents thereof - HELD THAT - Inability on the part of the appellant to provide the names of the actual buyers and sellers as asked for by the Ld. AO was sole basis for adding the entire credit side of the receipts to the income of the appellant which, amounting to us, is not sustainable neither justifiable. It is neither mandatory on the parties of the authorities to presume that whenever books of accounts are seized, the same belongs to the assessee irrespective of any other facts which may dissuade the authorities from doing so. Preponderance of probability has to be taken into consideration before rejecting the explanation furnished by the appellant. When the appellant has not denied the fact of being a property broker then in the absence of undisclosed investment found during search the AO is not justified in adding the entire receipts shown in the credit side of the seized cash sheet as the income of the appellant as rightly been observed by the Ld. CIT(A) while deleting the addition made by the Ld. AO; the same according to us is just and proper and without any ambiguity so as to warrant interference. Hence, the ground of appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed. Chargeability of interest u/s 234B(3) - HELD THAT - Charge the interest as per sub-section (3) of Section 234B of the Act as made by the Ld. CIT(A) is just and proper and therefore, the same is hereby confirmed. Thus, this ground of appeal preferred by the Revenue is found to be devoid of any merit and hence, dismissed.

Summary

Issues Involved:

1. Legality of the search operation under Section 132 of the Income Tax Act.
2. Addition of brokerage income at 2% of the total receipts.
3. Deletion of addition of undisclosed receipts.
4. Chargeability of interest under Section 234B(3).

Issue-wise Detailed Analysis:

1. Legality of the search operation under Section 132 of the Income Tax Act:

The assessee challenged the legality of the search operation conducted under Section 132 of the Income Tax Act, arguing that it was not in consonance with the provisions of the Act. The Tribunal noted that the search and seizure operation was carried out on the business and residential premises of the Saakar Group and the assessee was also covered due to his close business dealings with the group. The Tribunal did not find merit in the assessee's contention and upheld the search operation's legality.

2. Addition of brokerage income at 2% of the total receipts:

The assessee contested the addition of brokerage income at 2% of the total receipts, arguing that he had already offered the brokerage on a receipt basis in his return of total income. The Tribunal observed that the brokerage rate varied between 1% to 3% and was distributed among brokers involved in the transactions. The CIT(A) had restricted the brokerage addition to 2% of the total receipts based on seized documents. The Tribunal found that an addition of 2% was high and restricted it to 0.75% of the net receipts, partly allowing the assessee's appeal.

3. Deletion of addition of undisclosed receipts:

The Revenue challenged the deletion of an addition of ?31,61,92,920/- made by the AO on account of undisclosed receipts. The Tribunal noted that the AO had added the entire credit side of the cash book as income without allowing deductions for the debit side. The CIT(A) found this approach unjustified, emphasizing that no unrecorded assets were found during the search and the assessee had provided a peak working of the cash book. The Tribunal upheld the CIT(A)'s decision to delete the addition, stating that the AO's addition of the entire receipts was not sustainable.

4. Chargeability of interest under Section 234B(3):

The Revenue also contested the CIT(A)'s direction to charge interest under Section 234B(3) instead of Section 234B(1). The Tribunal referred to the judgment of the Hon'ble Kerala High Court in CIT vs. B. Lakshmi Kanthan, which held that in reassessments under Section 153A, interest for non-payment or short payment of advance tax is payable under Section 234B(3). The Tribunal confirmed the CIT(A)'s direction to charge interest as per Section 234B(3), dismissing the Revenue's appeal on this ground.

Combined Result:

(i) IT(SS)A No. 211/Ind/2016 filed by the assessee is partly allowed.
(ii) IT(SS)A No. 212/Ind/2016 filed by the assessee is partly allowed.
(iii) IT(SS)A No. 228/Ind/2016 filed by the Revenue is dismissed.
(iv) IT(SS)A No. 229/Ind/2016 filed by the Revenue is dismissed.

The order was pronounced in the open Court on 27.07.2021.