2016 (7) TMI 615 - HC - Income Tax

High Court upholds Tribunal decision, no burden of proof on department, deletes unaccounted stock addition

THE COMMISSIONER OF INCOME TAX GANDHINGAR Versus MOTI SEEDS COMPANY

The High Court affirmed the decision of the Income Tax Appellate Tribunal to delete the addition of unaccounted stock worth Rs. 81,92,710 for Assessment ... Addition on account of unaccounted stock - ITAT deleted addition - Whether the Appellate Tribunal was right in shifting the burden of proof of payment of unaccounted stock found during the course of search and seizure proceedings on the Department? - Held that:- Tribunal has not committed any error while passing the impugned order. In that view of the matter, both the issues are answered in favour of the assessee and against the department. Issues:Challenge to order passed by Income Tax Appellate Tribunal for Assessment Year 1999-2000 regarding addition of unaccounted stock and burden of proof on department.Analysis:1. The department challenged the ITAT's order adding unaccounted stock worth Rs. 81,92,710. The first issue was whether the Tribunal was correct in upholding the deletion of this addition. The appellant argued that the AO made the addition without specific findings on accounting practices, shifting the burden of proof to the department. However, the CIT (Appeals) and Tribunal both deleted the addition. The appellant contended that the Tribunal erred in deleting the addition and burden of proof was not on the department. The respondent, on the other hand, argued that the AO's error in proceeding under Section 158 of the Act after Section 143 order was incorrect. The Tribunal's observations highlighted the assessee's unaccounted trade and the lack of evidence for unaccounted purchases. The Tribunal found the AO's calculation erroneous and the Revenue's case unsubstantiated. Ultimately, the High Court found merit in the assessee's submissions, concluding that the Tribunal did not err in its decision, and thus dismissed the appeal.2. The second issue revolved around the burden of proof regarding unaccounted stock found during search and seizure proceedings. The appellant contended that the burden was wrongly shifted to the department. However, the respondent argued that the AO's actions were incorrect under Section 158 of the Act. The Tribunal's detailed analysis highlighted the lack of evidence for unaccounted purchases and the unsubstantiated nature of the Revenue's case. The High Court, after considering both sides' arguments and the Tribunal's findings, concluded in favor of the assessee, stating that the Tribunal did not err in its decision. Consequently, the appeal was dismissed, affirming the deletion of the addition of unaccounted stock and the burden of proof not resting on the department.