2022 (11) TMI 368 - AT - Income Tax

Assessment u/s 153A - addition on account of unaccounted income - notings in seized material decoded and deciphered by the assessing officer - AO rejected the contention of the assessee and observed that during the course of search proceedings certain loose papers were found and seized and cash was found - document seized from the branch office belonged to the assessee and the responsibility to explain the content of seized document lies with the assessee - CIT-A deleted the addition - HELD THAT - CIT(A) held that income arising from business activities carried out at the premises at Kolkata, subjected to search action u/s. 132, has been owned up and offered to tax by Shri Rajendrakumar Ramdas Patel for relevant assessment years and this has been accepted by both Investigation-Wing assessing officer at Ahmedabad. The assessing officer of assessee firm at Surat has deviated from this view, however, he has not given/placed on record any cogent evidences or given any discernible line of reasoning. There is no whisper in assessment order, as to the reason for not accepting the above view. Therefore, Ld. CIT(A) held that there is no reason to make any addition in hands of assessee-firm, as the addition in the hands of Shri Rajendrakumar Ramdas Patel (one of the partners of the assessee firm) was deleted. Accordingly, the impugned additions for assessment years 2011-12 and assessment year 2014-15 were deleted. That being so, we decline to interfere with the order of Ld. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue of both appeals, are dismissed. Addition made on protective basis on account of cash seized - CIT-A deleted the addition - as per revenue actual effect of ROI filed in the case of Shri Rajendra Ramdas Patel for A.Y. 2014-15 wherein the income offered to tax on account of disclosure u/s. 132(4) has been reduced by claiming set off of unallowable bad debt and thereby substantially reducing incidence of tax on the income disclosed u/s. 132(4) of the Act - HELD THAT - We note that during the appellate proceedings, the Ld. CIT(A) observed that assessing officer has made addition in respect of cash found during search action u/s. 132 at the premises in Kolkata in the hands of assessee-firm on protective basis. The Ld. CIT(A) noted that when the cash found is owned up and offered by Shri Rajendrakumar Ramdas Patel in his Income Tax Return and also assessed accordingly by the Jurisdictional assessing officer in his hands. Hence based on this factual position, Ld. CIT(A) deleted the addition. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the ground raised by the Revenue.

Summary

Issues Involved:
1. Deletion of addition on account of unaccounted income.
2. Failure to explain the content of seized documents.
3. Treatment of commission income.
4. Deletion of addition made on a protective basis for cash seized.
5. Procedural and evidentiary issues in the assessment process.

Detailed Analysis:

1. Deletion of Addition on Account of Unaccounted Income:
The Revenue challenged the deletion of additions amounting to Rs. 14,22,92,519/- for AY 2011-12 and Rs. 20,39,80,040/- for AY 2014-15 on account of unaccounted income. The Assessing Officer (AO) had made these additions based on loose papers seized during a search operation, which were decoded to reflect significant unaccounted income. The CIT(A) deleted these additions, concluding that the seized materials and the resultant income were already accounted for by one of the partners, who had disclosed Rs. 50 lakhs as additional income, including the cash found during the search.

2. Failure to Explain the Content of Seized Documents:
The AO noted that the assessee failed to explain the content of the seized documents, which contained complex and coded entries. Despite multiple opportunities, the assessee did not provide satisfactory explanations. However, the CIT(A) observed that the partner who could explain the documents was seriously ill and later passed away. The CIT(A) found that the AO did not make sufficient efforts to decode or understand the nature of the transactions recorded in the seized documents, leading to the deletion of the additions.

3. Treatment of Commission Income:
The AO treated the entire decoded amounts as unaccounted income without considering the nature of the assessee's business as an 'Angadia' or money courier service, which typically earns commission. The CIT(A) noted that the AO failed to analyze the transactions in light of the business activity and wrongly added the entire amounts as income. The CIT(A) concluded that only the commission income at 0.50% of the total amount noted should be taxed, which was already covered by the Rs. 50 lakhs disclosed by the partner.

4. Deletion of Addition Made on a Protective Basis for Cash Seized:
The AO made an addition of Rs. 29,81,300/- on a protective basis for cash seized during the search. The CIT(A) deleted this addition, noting that the cash was already owned up and offered to tax by the partner in his individual capacity, and was assessed accordingly. The CIT(A) found no reason to sustain the protective addition in the hands of the assessee firm.

5. Procedural and Evidentiary Issues in the Assessment Process:
The CIT(A) criticized the AO for making hurried and inadequately reasoned additions based on the seized documents. The CIT(A) highlighted the lack of a detailed and consistent investigation into the nature of the transactions and the overall business operations. The CIT(A) also pointed out the absence of efforts to trace the application of the alleged undisclosed income, which weakened the AO's case.

Conclusion:
The CIT(A) concluded that the income arising from the business activities at the Kolkata premises had been adequately disclosed and taxed in the hands of the partner, and there was no justification for additional assessments in the hands of the assessee firm. The appeals by the Revenue were dismissed, and the deletions made by the CIT(A) were upheld.