TaxTMI 
TaxTMI 
2012 (11) TMI 899
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....ssessment years from 1986-87 to 1996-97 (upto 19-1-1996). 3. According to the Assessing Officer, the seized records and materials made out a case of undisclosed income against the assessee. Therefore, he issued notice under section 158BC on 7-3-1997, which was served on the assessee on 18-3-1997. The assessee filed the return in Form No.2B on 26-5-1997. She admitted an undisclosed income of Rs. 2,31,098/- and paid tax of Rs. 1,38,659/-. 4. Later on, the Assessing Officer issued notice under section 143(2) on 29-5-1997 and set in motion the process of assessment of undisclosed income in the case of the assessee. The Assessing Officer found that the assessee is the proprietrix of three business concerns, namely M/s.Bharani Yolkam International, M/s. Bharani Real Estate and Sri Bala & Co. M/s.Bharani Yolkam International is doing business as commission agent for M/s.The Karur Co-operative Handloom Export Production Project Limited. The said business was said to be commenced from the assessment year 1984-85. The rate of commission entitled for the assessee was 10%. The assessee claimed various expenditure in respect of the said business in the form of salary, rent, electricity....
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....in her name for a number of litigations. The assessee had spent money to develop the property for running the business of a guest house. She was earning rental income from the assessment year 1993-94 onwards. The assessee did not admit such rental income from the guest house as income, but on the other hand, set off the income against the work in progress for the reason that the main business of real estate did not commence. The Assessing Officer relying on various court decisions, including that of the Hon'ble Supreme Court in Tuticorin Alkali Chemicasls vs CIT (227 ITR 172) held that the rentals constituted income and treated such receipts as undisclosed income of the assessee. A total amount of Rs. 10,85,000/- has been adopted as the undisclosed income of the assessee on this ground. The details are as below:- Assessment Year Amount 1993-94 Rs. 2,50,000/- 1994-95 Rs. 2,75,000/- 1995-96 Rs. 3,00,000/- 1996-97 (upto 19.1.96) Rs. 2,60,000/- Rs. 10,85,000/- It is to be stated that the above income has been worked out by the Assessing Officer on an estimate basis and not on the basis of exact accounts. 7. As per the statements and details furnishe....
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....roduction and Sales Society. The Assessing Officer treated the said commission income also as the undisclosed income of the assessee. The total comes to Rs. 38,538/- as stated below: Assessment Year Amount 1991-92 Rs. 10,986/- 1992-93 Rs. 7,669/- 1993-94 Rs. 1,112/- 1994-95 Rs. 18,771/- Rs. 38,538/- 11. While considering the undisclosed income for the assessment year 1991-92, the Assessing Officer has rejected the claim of the assessee that she had received a loan of Rs.2 lakhs from P.C.Palaniswamy of Erode for making investments in Sri Bala & Co and M/s.Bharani Real Estate. This loan of Rs.2 lakhs is also added by the assessing authority as undisclosed income. 12. While mentioning about M/s.Bharani Real Estate, we have mentioned that the assessing officer has accepted the income as returned by the assessee. Accordingly, he has treated Rs. 1242 as the undisclosed income of the assessee for the assessment year 1993-94. In the case of the same business, the assessee has claimed a depreciation of Rs. 15,228 for the assessment year 1994-95 in respect of an air conditioner. The Assessing Officer held that the air conditioner was installed in asses....
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....sp; Rs. 30,375/- 16. For the assessment year 1996-97 the assessee had shown an opening capital of Rs. 60,000/-. This was not accepted by the Assessing Officer and the same is treated as the assessee's undisclosed income. 17. A sum of Rs. 32,150/- was found in the course of search. Out of the above sum, the Assessing Officer treated Rs. 30,000/- as the undisclosed income of the assessee for the assessment year 1996-97. 18. As seen from the above paragraphs, the Assessing Officer has worked out the undisclosed income in the case of the assessee by estimating commission income; disbelieving the gifts received by the assessee; disallowing the opening capital; treating the cash found in the course of search as undisclosed income; disallowing a portion of the agricultural income returned by the assessee; treating the guest house income as undisclosed income; treating the loan amounts as undisclosed income; agricultural share income from M/s.MBS Granites treated as undisclosed income; income from sale of thorn trees treated as undisclosed income, etc., etc. at Rs. 1,15,75,840/-. 19. The abstract of the undisclosed income as computed by the Assessing Officer is extracted below....
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....ich were reflected in the letter dated 15-5-1995, furnished by the assessee to the Assistant Director of Income tax (Investigation) at Madurai. The remaining additions were considered by the Tribunal on merits. Some additions were confirmed and the others were deleted. In that manner the appeal was disposed of by the Tribunal through its order dated 14-2-2003. 24. The Revenue was aggrieved by the legal proposition made by the Tribunal that the reply dated 15-5-1995 filed by the assessee to the Assistant Director of Income-tax (Investigation) at Madurai amounted to disclosure for the purpose of Chapter XIV-B. It was the case of the Revenue that the description of the items made in the said letter does not amount to disclosure as contemplated in the provisions of law arranged under that Chapter. Therefore, the order of the Tribunal was taken in appeal under section 260A of the Income tax Act, 1961, before the Hon'ble jurisdictional High Court at Madras. The Hon'ble High Court disposed of the said appeal filed by the Revenue through the judgment of their Lordships delivered on 24-6-2010. After considering the issue in a very detailed manner, the Hon'ble High Court held that ....
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.... the amount was appropriated from her past income. This explanation is just and reasonable, which has been allowed. Accordingly this addition is deleted. 29. Ground No.8 related to the issue of Rs. 3,55,361/- added by the Assessing Officer on an estimate basis in respect of commission income. The assessee was running a business concern under the name and style of M/s.Sri Bharani Yolckms Internationals, which was earning commission income from orders placed with M/s.Karur Co-op. Handloom Export Production Project Ltd. right from the assessment year 1984-85. The assessee is not maintaining any regular books of account in respect of these transactions. The assessee estimated income by way of commission at 10% of the annual turnover. The Assessing Officer on the other hand, after allowing an expenditure of 40%, treated 60% as commission income of the assessee. It is how the addition of Rs. 3,55,361/- has been made by the assessing authority. In the present case, non maintenance of accounts is not so crucial, because the total turnover is always available, as the transactions are with M/s.Karur Co-op. Handloom Export Production Project Ltd. Only for the reason that the assessee....
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....ly on estimate basis, cannot be sustained in law. Therefore, the addition of Rs. 3,55,361/- is deleted. 30. The next ground No.9 deals with the estimated addition of Rs. 38,538/- against commission income. For the reasons stated in the above paragraph, this estimated addition of Rs. 38,538/- is deleted. 31. Ground Nos.10 and 11 raised by the assessee are against the addition of Rs. 1,16,000/- made by the Assessing Officer in the context of sale proceeds of thorn trees. The case of the Revenue is that the assessee was not maintaining any books of account for her real estate business. In the profit and loss account for the assessment years 1991-92 to 1997-98 filed after the search, the assessee has credited a sum of Rs. 20,000/- each year as income from sale of thorn trees but the same was not offered for taxation on the ground that the real estate business has not commenced and that it would only go to reduce the work-in-progress. The Assessing Officer has treated it as incidental income, following the principle laid down by the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT, 227 ITR 172. Since the thorn trees are not cultivated by t....
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....ly, another sum of Rs. 5 lakhs was also paid as part consideration and possession of the property was taken over. Due to litigation, the property could not be registered in the name of the assessee. The Revenue argues that the assessee has been running the guest house since 1993-94 and income therefrom has been returned so also the assessee has not maintained any books of account. It is in these circumstances, according to the Revenue, that estimation of income was warranted and as such the addition of Rs. 10,85,000/- has been made. The case of the assessee is that the property was never fully functional because of the dispute between the assessee and the seller of the property. Even the title of the property was not transferred in the name of the assessee. The litigation reached upto the Hon'ble Supreme Court. Meanwhile certain irregular income was received by the assessee by operating the guest house in a very nominal way and such negligible income was actually used for maintaining the guest house property. 34. There is no dispute regarding the basic fact that the guest house property was under litigation and the assessee could not get the title transferred in her name. Thi....
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....reditors, who appeared before him, the Assessing Officer found that many of the creditors did not have enough creditworthiness so as to advance amounts to the assessee. It is in these circumstances that the Assessing Officer has disbelieved the credits/loans and made the addition of Rs. 75,16,875/-. The detailed submissions and explanations of the assessee in this regard are made in paragraph 13 of the statement of facts available on record. In short, it is the case of the assessee that she has taken loans from 42 persons for business purposes. The assessee had filed confirmation letters before the Assessing Officer in support of those credits. She could also produce some of the creditors before the Assessing Officer. Those creditors were examined. It is only for the reason that the Assessing Officer has disbelieved them, the additions were made. 36. We considered this matter very seriously. A set of loans received from twelve persons like Balu, Vijaya, Sriramulu totaled to Rs. 13,16,000/-. The amount of loan ranged from Rs. 16,000/- to Rs. 4 lakhs. The biggest amount of Rs. 4 lakhs comes from Dhaman Prakash (Dharmabal Associate). The reason pointed out by the Assessing Officer ....
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.... rejected by the Assessing Officer on the ground that no evidence of doing agricultural operations was furnished by the assessee. It is also the case of the Assessing Officer that no expenses also have been found to be debited towards earning such income. We considered this issue. There is no dispute regarding the holding of properties by the assessee. It is also undisputed that the property is agricultural property. When the assessee is having agricultural property and offering agricultural income, the normal presumption is that the assessee is carrying on agricultural operations. Disclosure of agricultural income itself is prima facie evidence of carrying on agricultural operations. The next objection of the Assessing Officer is that the assessee has not debited expenses towards agricultural operations. It is to be seen that the assessee has offered net agricultural income on an estimate basis. Therefore, it is obvious that no separate expenditure account would be reflected in the particulars filed by the assessee. In these circumstances we find that there is no justification in rejecting the claim of the assessee towards agricultural income. Accordingly, the addition of Rs....