2020 (12) TMI 399 - AT - Income Tax

Appeal partially allowed, penalties confirmed, remanded for recomputation.

M/s S. Singhal & Co. Versus The ACIT, Central Circle, Alwar.

M/s S. Singhal & Co. Versus The ACIT, Central Circle, Alwar. - TMI Issues Involved:1. Addition of Rs. 2,20,000 on account of alleged unexplained investment.2. Levy of penalty under section 271(1)(c) for A.Y. 2004-05.Issue-wise Detailed Analysis:1. Addition of Rs. 2,20,000 on account of alleged unexplained investment:The primary issue revolves around the addition of Rs. 2,20,000 to the income of the assessee firm due to alleged unexplained investment in electronic items. The facts of the case disclose that during a search conducted on the Kamdhenu Group, two bills issued by Ganpati Electronics were seized from the residence of one of the partners of the assessee firm. These bills included one for Rs. 45,000 and another for Rs. 1,75,000. The Assessing Officer (AO) made an addition of Rs. 2,20,000, concluding that the assessee firm failed to satisfactorily explain the source of investment for these purchases.The AO's findings included:- The bill for Rs. 45,000 had the name of the assessee firm, indicating the purchase was made by the firm.- The claim that the payment was made by an individual (Sh. W. R. Singhal) was unsupported by evidence.- The bill for Rs. 1,75,000, although claimed to be mistakenly attached, was deemed to belong to the assessee firm due to circumstantial evidence.The CIT(A) upheld the AO's decision, emphasizing that the assessee failed to substantiate its claims with documentary evidence and that the primary onus was on the assessee to explain the seized documents. The CIT(A) cited section 132(4A) of the IT Act, which presumes documents found during a search belong to the person in possession unless rebutted.Upon appeal, the Tribunal noted:- The documents were seized from the residence of a partner, not the firm's official premises.- The presumption under section 132(4A) applies to the individual (Sh. S.K. Singhal) unless rebutted.- The bill for Rs. 45,000 was accepted by the assessee firm, but the payment source was not corroborated by evidence, thus, the addition for Rs. 45,000 was upheld.- The bill for Rs. 1,75,000 did not mention the firm's name and was presumed to belong to the individual, leading to the deletion of the Rs. 1,75,000 addition.2. Levy of penalty under section 271(1)(c) for A.Y. 2004-05:The second issue concerns the levy of penalty under section 271(1)(c) for the assessment year 2004-05. The Tribunal noted that no specific arguments were presented by the assessee's representative regarding the penalty. Considering the AO's order, the Tribunal confirmed the levy of penalty. However, given the partial sustenance of additions, the matter was remanded to the AO for recomputation of the quantum of penalty based on the sustained addition.Conclusion:The appeal was partly allowed, with the addition of Rs. 45,000 upheld and the addition of Rs. 1,75,000 deleted. The penalty issue was remanded to the AO for recomputation in light of the Tribunal's directions.