2015 (3) TMI 1278 - AT - Income Tax

Tribunal confirms recalculations, dismisses appeal on reassessment and cross-examination issues

The Tribunal upheld the CIT(A)'s recalculations and partial reliefs, confirming additions for unexplained advances and unaccounted interest. The grounds ... Reopening of assessment - peak credit addition - validity of notice - Held that:- In the instant case, if we accept the contention of the assessee that the Assessing Officer has acted at the behest of the Investigation Wing, then in that case he would have made addition of ₹ 9,83,50,000/- which is as per the reasons for issue of notice u/s.148 for the A.Y. 2002-03. Further, from the letter dated 10-12-2009 by the JCIT, Range-1, Jalgaon to JDIT (Investigation) Jalgaon, we find the JCIT has mentioned that peak determined by the Investigation Wing is incorrect and the peak is coming to negative for which he has requested for further material at the disposal of the Investigation Wing. Therefore it is not a case where the Assessing Officer has acted at the behest of the JDIT. He has acted in a very judicious manner acting independently thus we dismiss the additional ground raised by the assessee. Addition on advances and interest thereon - Held that:- After thoroughly analysing he considered certain transactions which according to him do not appear to be taxable receipts. Such transactions are without any reference to interest or profit on sale and are just financial transactions involving receipts by the assessee and cannot be considered as income for the impugned assessment year. He therefore added these loans for the purpose of working out the peak credit but did not consider the same as income. Similarly, certain transactions represented sale of jewellery which according to him cannot be said as income as such. According to him, only the profit element can be considered as taxable. He accordingly restricted such interest and other income to ₹ 62,51,754/- as against ₹ 82,81,598/- determined by the Assessing Officer. This reasoned finding given by the CIT(A) in our opinion does not suffer from any infirmity and accordingly the same is upheld. The grounds raised on this issue are accordingly dismissed Addition on account of alleged interest received on the unexplained investment - Held that:- After considering the reply of the assessee to such enhancement notice, the Ld.CIT(A) enhanced the income and directed the AO to adopt interest of ₹ 73,31,192/-. Nothing contrary was brought to our notice by the Ld. Counsel for the assessee against the said calculation. Under these circumstances, the third issue raised by the assessee in the ground is dismissed. The appeal filed by the assessee for this year is accordingly dismissed. Issues Involved1. Validity of Reassessment Proceedings2. Addition of Unexplained Advances3. Addition of Unaccounted Interest4. Addition of Labour Charges and Office Expenses5. Admission of Additional Grounds6. Cross-Examination and Statement of Third Parties7. Applicability of Section 153CDetailed Analysis1. Validity of Reassessment ProceedingsThe assessee challenged the reassessment proceedings under section 147, arguing that the case should have been assessed under section 153C due to the search and seizure action on Chhoriya Group. The CIT(A) upheld the reassessment proceedings, noting that the Assessing Officer (AO) had valid reasons to believe that income had escaped assessment based on seized documents. The Tribunal agreed, finding no requirement for section 153C as no books of account or documents belonging to the assessee were found during the search.2. Addition of Unexplained AdvancesThe AO added Rs. 2,91,36,825 as unexplained advances based on entries in Chhoriya Group's seized documents. The CIT(A) recalculated the peak credit, excluding a disputed entry of Rs. 2,80,00,000, and reduced the addition to Rs. 9,30,000. The Tribunal upheld this recalculated peak credit, agreeing with the CIT(A) that the disputed entry likely pertained to an earlier period.3. Addition of Unaccounted InterestThe AO added Rs. 82,81,598 as unaccounted interest based on seized documents. The CIT(A) reduced this to Rs. 62,51,754 after detailed analysis, excluding certain transactions that did not appear to be taxable receipts. The Tribunal upheld this revised addition, finding the CIT(A)'s detailed examination and calculations to be reasonable.4. Addition of Labour Charges and Office ExpensesThe AO added Rs. 77,026 for under-valuation of closing stock by not including labour charges and Rs. 10,000 for estimated office expenses. The CIT(A) upheld these additions based on the assessee's admission and lack of supporting vouchers. The Tribunal dismissed these grounds as 'not pressed' by the assessee.5. Admission of Additional GroundsThe assessee raised an additional ground, arguing that the reassessment order was passed at the behest of the Investigation Wing, making it void. The Tribunal admitted the additional ground but found no merit in it, noting that the AO had acted independently and judiciously.6. Cross-Examination and Statement of Third PartiesThe assessee argued that the statement of Shri Devichand Motilal Chhoriya, who claimed the entries were imaginary, should be accepted. The AO and CIT(A) rejected this, noting that initial statements did not mention imaginary names and that the assessee had business relations with Chhoriya Group. The Tribunal upheld this decision, finding the transactions to be real and supported by corroborative evidence.7. Applicability of Section 153CThe assessee contended that the assessment should have been under section 153C. The Tribunal found this inapplicable as no books of account or documents belonging to the assessee were seized from Chhoriya Group. The Tribunal upheld the reassessment under section 147.ConclusionThe Tribunal upheld the CIT(A)'s recalculations and partial reliefs, confirming the additions for unexplained advances and unaccounted interest, while dismissing the grounds related to the validity of reassessment proceedings, additional grounds, and cross-examination issues. The appeals by the assessee and the revenue were dismissed.