2016 (5) TMI 1143 - AT - Income Tax

Tribunal dismisses Revenue's appeal on undisclosed income inclusion

The ITO, Ward-4 (1), Ahmedabad Versus Gopal Glass Works Ltd.

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal regarding the addition of undisclosed income of Rs. 2.00 crores and its ... Addition on account of undisclosed income - Held that:- Revenue failed to collect any other material during the course of survey, and accordingly, on the basis of the statement given without oath, addition cannot be made. Therefore, the ld.CIT(A) has rightly deleted the addition. Exclusion of undisclosed income from the book profit computed under section 115JB - Held that:- This ground deserves to be rejected simply for two reasons, viz. addition of ₹ 2.00 crores has already been deleted, therefore, there cannot be any adjustment, and (b) the accounts of the assessee are prepared in accordance with Part-II of the Schedule-IV of the Companies Act, 1956. Any adjustment can be made in the book profit only with regard to the items provided in clause (a) to (ha) appended with Explanation to section 115JB. No adjustment has been provided in section 115JB. The AO has no power to tinker with the accounts of the assessee, which have been prepared in accordance with Part-II of schedule-VI to the Companies Act. The ld.CIT(A) has assigned these two reasons, for buttressing his conclusion on the second reasoning, the ld.CIT(A) put reliance upon the judgment of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. Vs. CIT, (2002 (5) TMI 5 - SUPREME Court ). In view of the above discussion, we do not find any merit in this appeal of the Revenue Issues:1. Addition of undisclosed income of Rs. 2.00 crores.2. Exclusion of Rs. 2.00 crores from book profit under section 115JB.Issue 1: Addition of undisclosed income of Rs. 2.00 crores:The case involved the Revenue appealing against the order of the ld.CIT(A)-VIII, Ahmedabad regarding the assessment year 2007-08. The Revenue contested the deletion of the addition of Rs. 2.00 crores made by the AO as undisclosed income and the exclusion of the same amount from the book profit computed under section 115JB of the Income Tax Act. The AO based the addition on a statement by the Managing Director during a survey, where he disclosed the amount but later retracted it. The CIT(A) deleted the addition citing lack of incriminating material and the retracted statement. The Tribunal found that the statement during the survey had no evidentiary value, following precedents from Kerala and Madras High Courts. The Revenue failed to provide additional evidence, leading to the deletion of the addition.Issue 2: Exclusion of Rs. 2.00 crores from book profit under section 115JB:The second issue revolved around the Revenue's grievance that the ld.CIT(A) erred in excluding the Rs. 2.00 crores from the book profit for section 115JB purposes. The Tribunal rejected this ground, stating that since the addition of Rs. 2.00 crores had been deleted, there was no basis for adjustment. Furthermore, the accounts were prepared in compliance with the Companies Act, and adjustments in book profit could only be made as per specific clauses in the Explanation to section 115JB. The Tribunal emphasized that the AO lacked the authority to modify the accounts prepared according to the Companies Act. The ld.CIT(A) relied on a Supreme Court judgment to support this conclusion, ultimately dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal concerning the addition of undisclosed income and the exclusion of the same amount from the book profit under section 115JB for the assessment year 2007-08.