2013 (8) TMI 964 - AT - Income Tax

Tribunal Rules in Favor of Assessee on Income Estimation and Cash Telescoping

The Tribunal partly allowed the assessee's appeals and dismissed all the Revenue appeals. The Tribunal confirmed the estimation of income at 2% on gross ... - Issues involved:1. Addition towards cash found during search.2. Addition towards profit from coal business.3. Addition towards freight payments.4. Addition towards creditors.5. Addition towards illegal payments.6. Estimation of profit and rejection of books of account.7. Initiation of penalty proceedings u/s 271(1)(c).Summary:1. Addition towards cash found during search:The CIT(A) sustained the addition of Rs. 34,65,800 treating the cash found as unexplained money, as the assessee failed to explain the sources with the help of cash book/books of account and reconcile relevant accounts.2. Addition towards profit from coal business:The CIT(A) confirmed the addition of Rs. 66,22,467 for A.Y. 2009-10 but restricted it to Rs. 49,66,355 based on actual figures from seized material. For A.Y. 2008-09, the addition of Rs. 40,00,000 was confirmed but reduced by 50% due to lack of specific information, resulting in an addition of Rs. 20,00,000.3. Addition towards freight payments:The CIT(A) deleted the additions for A.Ys. 2005-06 to 2009-10, observing that the Assessing Officer made estimations without rejecting the books of accounts or pointing out specific defects, and the disallowances were made summarily without any basis.4. Addition towards creditors:The CIT(A) deleted the additions for A.Ys. 2003-04 to 2006-07, noting that the Assessing Officer's conclusions were hypothetical and not based on sound footing. The CIT(A) also observed that the addition on account of creditors along with the disallowance of freight charges amounted to double disallowance.5. Addition towards illegal payments:The CIT(A) confirmed the addition of Rs. 5,00,000 for A.Y. 2009-10 based on seized material indicating illegal payments to ICL & SCCL staff. For A.Ys. 2003-04 to 2008-09, the disallowance was modified and reduced, resulting in a relief of Rs. 10,00,000 out of the total disallowance of Rs. 30,00,000.6. Estimation of profit and rejection of books of account:The CIT(A) rejected the books of account and directed the Assessing Officer to estimate income at 2% of the gross receipts for A.Ys. 2003-04 to 2009-10. The Tribunal confirmed this estimation, considering the past history of the assessee.7. Initiation of penalty proceedings u/s 271(1)(c):The Tribunal dismissed the assessee's challenge to the initiation of penalty proceedings, stating that the assessee is at liberty to challenge the penalty order independently.Conclusion: The Tribunal partly allowed the assessee's appeals and dismissed all the Revenue appeals, confirming the estimation of income at 2% on gross transport receipts and the addition towards illegal payments, while allowing telescoping of excess cash found during the search.Order pronounced in the open court on 2nd August, 2013.