2007 (6) TMI 239 - AT - Income Tax

Tribunal Upholds Validity of Assessments, Partially Allows Appeals, Deletes Some Income Additions Due to Lack of Evidence.

Ms. Shyam Lata Kaushik. Versus Assistant Commissioner Of Income-tax, Central Circle, Faridabad.

The Tribunal addressed multiple issues in the case, focusing on the validity of assessments and various financial estimations. The Tribunal upheld the ... Assessment made u/s 153A - estimating the receipts of the appellant from job work of buffing and polishing - Estimation Of Profits u/s 144 - rejection of books of account - HELD THAT:- As rightly contended by the ld DR, there is no requirement for an assessment made u/s 153A of the Act being based on any material seized in the course of search. Further under the second proviso to section 153A pending assessment or re-assessment proceedings in relation to any assessment year falling within the period of six assessment years referred to in section 153A(b) of the Act shall abait. Thus the Assessing Officer, gets jurisdiction for six years assessment years referred to in section 153A(b) of the Act for making an assessment or reassessment. It is not the complaint of the assessee that any income, which is already subjected to assessment u/s 143(3) or u/s 148 of the Act completed prior to the search in respect of six assessment years referred to in section 153A(b) of the Act and in the second proviso to section 153A, has also been included in the assessment framed u/sn 153A of the Act. In such circumstances the plea of the assessee cannot be accepted. Ground No. 1 is, therefore, rejected. Books of account rejected - estimation of income - In the present case, the Assessing Officer in coming to the conclusion that the income of the assessee from buffing and polishing was at Rs. 5,50,000 has not brought any material on record. In fact it has been a wild guess, on the part of the Assessing Officer. The addition having been made without any reference to either the past history in assessee's case or any special circumstances suggesting earning of higher income by the assessee, or any comparative case, the addition deserves to be deleted and the same is directed to be deleted. The 6th ground of appeal of the assessee, is allowed. Income from sale of scrap - HELD THAT:- We are of the view that the addition made by the Assessing Officer and sustained by the CIT (Appeals) deserves to be deleted. There has been no basis for the estimation given by the Assessing Officer. The sweeping observation that the income from sale of scrap declared by the assessee was very low in the type of business in which the assessee is engaged would not be sufficient for making the addition. The addition made is, therefore, directed to be deleted and the 7th ground of appeal of the assessee is also allowed. Addition u/s 68 - undisclosed concealed income - HELD THAT:- Assessee has not been able to Jet in any evidence or to show as to how the source of Rs. 40,000 deposited in the capital account was from disclosed sources. On the other hand, general argument was advanced that because of lapse of time the assessee has not been able to explain the source properly. It has also been argued that the plea of the assessee has to be accepted on the basis of probability as the assessee can be expected to have source to the extent of Rs. 40,000. We are of the view that such general submissions cannot be accepted. The assessee having failed to explain the source with regard to the deposit under capital account, the addition of Rs. 40,000 was justified and the same is confirmed and the third ground of appeal of the assessee, is dismissed. Addition on low household expenses - HELD THAT:- We are of the view that this addition has been made purely on surmises and conjectures. The estimate of house-hold expenses as made by the Assessing Officer is without any basis. In the light of the categorical assertion that the quantum of household expenses was only Rs. 99,800 and in the light of the withdrawal by the assessee's husband of Rs. 60,000 from his books of account and the surrender of Rs. 39,800 before the Income-tax Settlement Commission, there was no basis for the Assessing Officer to have made the impugned addition and the same is directed to be deleted. Ground No. 5 of the assessee is allowed. In the result, the appeal filed by the assessee, is partly allowed. Addition on unexplained deposit u/s 68 - identity of the creditor, creditworthiness of the depositor and the genuineness of the transaction had not been established - HELD THAT:- In our view, the assessee had established the identity of the creditors. The sums in question were Rs. 18,000 and Rs. 5,000 respectively. These were too small an amount, which would warrant drawing of adverse inference regarding the creditworthiness and genuineness of the transaction. In the circumstances, the Assessing Officer ought to have exercised his discretion in not making an addition u/s 68 of the Act. Accordingly, we delete the addition made in respect of the credits appearing in the name of Shri Mohan Lal and Shri P.K. Sharma. Ground No. 2 of the assessee, is partly allowed. Addition of low withdrawals for meeting the house-hold expenses - HELD THAT:- We are of the view that the addition has been made without any basis and the explanation of the assessee in this regard is found to be satisfactory. The addition made is directed to be deleted. The third ground of appeal of the assessee is allowed. In the result, Income-tax Appeal are partly allowed while other Income-tax Appeal is dismissed. Issues Involved:1. Validity of assessment under section 153A of the Income-tax Act.2. Justification of income estimation under section 144 of the Act.3. Addition on account of sale of scrap.4. Addition of unexplained deposit.5. Disallowance of public relation expenses.6. Addition on account of low household expenses.7. Disallowance of processing charges.Detailed Analysis:1. Validity of Assessment under Section 153A:The assessee challenged the CIT (Appeals) order as bad in law, arguing that the assessment was completed without any seized material. The Tribunal rejected this contention, stating that there is no requirement for an assessment under section 153A to be based on seized material. The Assessing Officer is empowered to reassess the total income for six assessment years preceding the year of search under the second proviso to section 153A. The Tribunal found no merit in the assessee's plea and dismissed this ground.2. Justification of Income Estimation under Section 144:The assessee failed to produce books of account, leading the Assessing Officer to estimate the income under section 144. The CIT (Appeals) upheld this estimation. The Tribunal found that the Assessing Officer's estimation of income at Rs. 5,50,000 was a 'wild guess' without any material basis. The Tribunal directed the deletion of the addition of Rs. 61,485, allowing this ground of appeal.3. Addition on Account of Sale of Scrap:The Assessing Officer made an addition of Rs. 19,990, estimating the sale of scrap at Rs. 23,500 against Rs. 3,510 shown by the assessee. The CIT (Appeals) confirmed this addition. The Tribunal found no basis for the Assessing Officer's estimation and directed the deletion of the addition, allowing this ground of appeal.4. Addition of Unexplained Deposit:The Assessing Officer added Rs. 40,000 as unexplained deposit under section 68, as the assessee could not provide sufficient details about the bank account. The CIT (Appeals) upheld this addition. The Tribunal found that the assessee failed to explain the source of Rs. 40,000 and confirmed the addition, dismissing this ground of appeal.5. Disallowance of Public Relation Expenses:The Assessing Officer disallowed Rs. 7,511 claimed as public relation expenses due to lack of evidence. The CIT (Appeals) confirmed this disallowance. The Tribunal found justification in the disallowance due to the absence of specific details and dismissed this ground of appeal.6. Addition on Account of Low Household Expenses:The Assessing Officer added Rs. 24,000 for low household expenses, citing insufficient withdrawals for personal needs. The CIT (Appeals) confirmed this addition. The Tribunal found the addition to be based on surmises and conjectures, without any basis, and directed its deletion, allowing this ground of appeal.7. Disallowance of Processing Charges:The Assessing Officer disallowed Rs. 1,11,542 out of processing charges due to missing bills. The CIT (Appeals) confirmed this disallowance. The Tribunal found no valid explanation from the assessee and confirmed the disallowance, dismissing this ground of appeal.Additional Judgments:- For the assessment year 1999-2000, the Tribunal dismissed the appeal concerning the validity of assessment under section 153A and disallowance of processing charges. The Tribunal found the addition for low household expenses to be infructuous due to the confirmed disallowance of processing charges.- For the assessment year 2000-01, the Tribunal dismissed the appeal concerning the validity of assessment under section 153A. It partly allowed the appeal regarding unexplained deposit, confirming the addition for Shri Salender Vashist but deleting the addition for Shri P.K. Sharma and Shri Mohan Lal. The Tribunal also allowed the appeal concerning low household expenses, directing the deletion of the addition.Conclusion:- Income-tax Appeal Nos. 4343 (Delhi) of 2006 and 4345 (Delhi) of 2006 were partly allowed.- Income-tax Appeal No. 4344 (Delhi) of 2006 was dismissed.