2015 (4) TMI 767 - AT - Income Tax

Tribunal Decisions on Tax Assessments: Income Discrepancy, Expenditure Disallowance, Foreign Trips

ACIT & Others Versus Mr. Pratap Jadeja & Others

ACIT & Others Versus Mr. Pratap Jadeja & Others - TMI Issues Involved:1. Deletion of additions made by the A.O. on account of undisclosed income from suppressed turnover.2. Deletion of additions made by the A.O. towards inflation of expenditure.3. Deletion of additions made by the A.O. on account of expenditure incurred by the assessee on foreign trips.4. Direction to the A.O. to make the addition of Rs. 20 lakhs on account of income surrendered by the assessee during the course of search.Detailed Analysis:1. Deletion of Additions on Account of Undisclosed Income from Suppressed Turnover:The common issue in all the seven appeals by the Revenue pertains to the deletion by the Ld. CIT(A) of the additions made by the A.O. to the total income of the assessee on account of undisclosed income arising from suppressed turnover. The assessee, a catering contractor, was subjected to a search under section 132 of the Act, revealing suppressed receipts amounting to Rs. 56,17,750 for A.Y. 2008-2009. The A.O. applied an average gross profit rate of 52.58% to estimate the undisclosed income at Rs. 29,53,813 and made corresponding additions for A.Y. 2008-2009. For A.Ys. 2002-2003 to 2007-2008, the A.O. estimated suppressed sales based on the ratio found for A.Y. 2008-2009, resulting in further additions.The Ld. CIT(A) found merit in the assessee's submissions, noting that the evidence found during the search was only sufficient to show suppression for A.Y. 2008-2009, and the income of Rs. 50 lakhs was already offered by the assessee to cover the suppressed receipts. Thus, the Ld. CIT(A) deleted the additions for all years, except for A.Y. 2008-2009, where he directed the A.O. to add Rs. 20 lakhs due to a discrepancy in the declared income.The Tribunal upheld the Ld. CIT(A)'s order for A.Ys. 2002-2003 to 2006-2007, agreeing that no material was found to support the additions. However, for A.Y. 2007-2008, the Tribunal set aside the Ld. CIT(A)'s order, as the assessment was pending on the date of search, and restored the matter to the A.O. for fresh consideration. For A.Y. 2008-2009, the Tribunal upheld the Ld. CIT(A)'s deletion of the addition, noting that the income of Rs. 50 lakhs was already declared by the assessee.2. Deletion of Additions Towards Inflation of Expenditure:During the search, debit vouchers of M/s. Niyantran Caterers were found, lacking supporting bills or signatures, leading the A.O. to treat the expenses as inflated and make corresponding additions for A.Ys. 2007-2008 and 2008-2009. The A.O. also estimated inflated expenses for A.Ys. 2002-2003 to 2006-2007 based on the ratio found for A.Y. 2007-2008.The Ld. CIT(A) found merit in the assessee's explanation that the expenses were incurred in the ordinary course of business and directed the A.O. to restrict the disallowance to 5% of the relevant expenses for unverifiable elements. The Tribunal upheld this decision, noting that while the expenses were not fully verifiable, there was no evidence of inflation, and the 5% disallowance was reasonable.3. Deletion of Additions on Account of Expenditure Incurred on Foreign Trips:The A.O. added Rs. 1 lakh per year for A.Ys. 2005-2006 to 2008-2009 as undisclosed income from foreign trips funded by M/s. Legend Estate P. Ltd. and a further Rs. 1 lakh per year as unexplained expenditure on these trips. The Ld. CIT(A) deleted these additions, noting that the air tickets were funded by Legend Estates and the expenditure was met from the assessee's business activities.The Tribunal upheld the deletion for A.Ys. 2005-2006 and 2006-2007, as there was no material found during the search to support the additions. For A.Ys. 2007-2008 and 2008-2009, the Tribunal restored the matter to the A.O. for verification of the additional evidence provided by the assessee.4. Direction to Add Rs. 20 Lakhs on Account of Income Surrendered During Search:The Ld. CIT(A) directed the A.O. to add Rs. 20 lakhs to the total income for A.Y. 2008-2009, noting that only Rs. 30 lakhs of the Rs. 50 lakhs surrendered during the search was declared in the computation of income. The Tribunal condoned the delay in the assessee's appeal and restored the matter to the A.O. for verification of the assessee's claim that the remaining Rs. 20 lakhs was credited to the P & L account as other income.Conclusion:The appeals of the Revenue for A.Ys. 2002-2003 to 2006-2007 were dismissed, while the appeals for A.Ys. 2007-2008 and 2008-2009 were partly allowed for statistical purposes. The assessee's appeal for A.Y. 2008-2009 was allowed for statistical purposes.