2004 (7) TMI 295 - AT - Income Tax

Tribunal upholds Department's appeal on unaccounted income, deems assessee's retraction not credible.

The Tribunal allowed the Department's appeal, upholding the addition of Rs. 4,50,000 made by the Assessing Officer. It found that the deletion of Rs. ... - Issues Involved:1. Deletion of the addition of Rs. 4,41,359 out of the total addition of Rs. 4,50,000 made by the AO on account of unaccounted purchases and sales.Detailed Analysis:1. Deletion of the Addition of Rs. 4,41,359:The Department appealed against the order of the learned CIT(A) dated 24th February 1999, which deleted Rs. 4,41,359 out of the total addition of Rs. 4,50,000 made by the AO on account of unaccounted purchases and sales. The primary issue was whether the assessee had successfully retracted from his statement recorded during the survey and whether the deletion by the CIT(A) was justified.Relevant Facts:- The assessee derived income from the manufacture and sale of screws and had shown a Gross Profit (GP) rate of 13.38% on gross sales of Rs. 22,85,853 for the year under consideration.- During a survey under section 133A conducted on 20th July 1995, the assessee was confronted with 68 challans/bills, of which 29 pertained to the year under consideration. These challans, seized from Chandigarh Steel Products, were not recorded in the assessee's books.- The assessee initially agreed to make a disclosure of Rs. 5 lakhs but later retracted, claiming coercion and misunderstanding.AO's Findings:- The AO found that the assessee had made unrecorded purchases of MS wire weighing 26.273 tonnes valued at Rs. 4,72,914. With a GP rate of 12.40%, the total investment and profit were calculated at Rs. 5,31,555.- The AO added the balance amount of Rs. 4.50 lakhs to the income of the assessee after considering the surrendered amount of Rs. 50,000.CIT(A)'s Decision:- The CIT(A) sustained the addition of Rs. 8,641, observing that the AO had worked out the profit on unrecorded purchases at Rs. 58,641, and the assessee had already surrendered Rs. 50,000.- Relief of Rs. 4,41,359 was granted to the assessee.Tribunal's Analysis:- Both parties agreed that the facts of the present case were identical to those of the assessee's case for the assessment year 1995-96.- The Tribunal referred to its earlier findings in ITA No. 289/Chd/1999 for the assessment year 1995-96, where it was concluded that the retraction by the assessee from the disclosure of Rs. 5 lakhs was not justified.- The Tribunal noted that the assessee had not provided sufficient evidence to support his retraction and that the initial surrender was made voluntarily when confronted with unrecorded purchases.Conclusion:- The Tribunal reversed the order of the CIT(A) and restored that of the AO, holding that the deletion of Rs. 4,41,359 was not justified.- The Tribunal emphasized that the surrender made by the assessee was not forced but was a result of being cornered regarding unrecorded purchases.Case Law:- The Tribunal distinguished the present case from the case law relied upon by the assessee, noting that the facts were different and that the retraction in the present case was not supported by sufficient evidence.Final Judgment:- The appeal of the Department was allowed, and the addition of Rs. 4,50,000 made by the AO was upheld.In summary, the Tribunal found that the assessee's retraction from the initial disclosure of Rs. 5 lakhs was not credible and that the deletion of Rs. 4,41,359 by the CIT(A) was not justified. The Tribunal restored the AO's addition of Rs. 4,50,000 to the assessee's income.