2002 (11) TMI 737 - AT - Income Tax

Tribunal overturns addition to income based on seized document, stresses importance of verified book entries

The Tribunal allowed the appeal, overturning the CIT(A)'s decision to add Rs. 30,637 to the assessee's income. The Tribunal found that the addition was ... Method of accounting - Estimation of profit Issues:Appeal against CIT(A) order confirming addition on account of difference in entries on books of account.Analysis:The case involved an appeal by the assessee against the CIT(A) order confirming an addition of Rs. 30,637 on account of a difference in entries on the books of account. The dispute arose from a search operation under section 132(1) of the Income-tax Act, 1961 at the business premises of the assessee. During the search, a document was found containing calculations related to a supplier from whom the assessee purchased rice bran. The Assessing Officer noted a difference of Rs. 30,637.41 between the inflated amount in the books of account and the amount shown on the document. The Assessing Officer concluded that the difference represented an inflation of purchase in the account books, leading to the addition to the assessee's income.The CIT(A) upheld the addition, emphasizing the specific and definite nature of the entries on the seized document. However, the assessee argued that the figures on the document were estimates and that the entries in the books of account were based on correct calculations of the goods purchased. The assessee further contended that the Assessing Officer did not verify the purchases with the supplier and that payments had already been made based on the entries in the books of account. The assessee maintained that the Assessing Officer had no justification for the addition.Upon review, the Tribunal found that the addition was solely based on figures from the seized document, without verifying the purchases with the supplier or rejecting the book results under section 145(1) of the Act. The Tribunal concluded that the entries in the books of account, supported by bills from the supplier without discrepancies, should be preferred over rough estimates found during the search. Consequently, the Tribunal allowed the appeal and deleted the addition of Rs. 30,637 confirmed by the CIT(A).In summary, the Tribunal's decision focused on the lack of verification of purchases with the supplier and the absence of discrepancies in the bills provided. The Tribunal emphasized the importance of relying on entries in the books of account supported by authenticated bills, rather than rough estimates from seized documents, leading to the deletion of the addition in dispute.