2014 (12) TMI 218

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....Facts in brief :- The assessee is an individual and is in the business of travel agency. A survey u/s 133A of the Act was conducted on 3.10.2005 at the business premises of the assessee. The assesee filed his return of income declaring income of Rs. 1,39,910/- on 31.3.2006. Notice u/s 148 was issued after recording reasons. Thereafter the assessment order was passed u/s 148 of the Act determining the total income of Rs. 99.15 lakhs for the reason that none appeared on behalf of the assessee, even after sufficient opportunities were given. The entire addition was based on black diary (executive diary ) containing 104 pages which was allegedly found at Chandni Chowk premises of the assesse which was impounded. On appeal the first appellate authority granted part relief. The asseseee filed cross objections on the following grounds :- 1. " That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction u/s 147, moreso when the reasons recorded is vague and based on suspicion. 2. That in any view of the matter and in any case, action of Ld. AO in assuming jurisdiction u/s 147 is bad ....

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...., however, cannot be taken as a sufficient ground for making such addition in the absence of any cogent reasons or evidence brought on record. It is also a well established position of law that the AO cannot proceed to make an arbitrary addition and base his conclusion purely on guess work. Determination of income is a serious matter and not merely a mathematical exercise to be made on the whims and fancies of the assessing officer. 10.1 It is observed that the Assessing Officer has taken the net profit for month of July 2005 calculated on the basis of computer sheets as a base for calculating the net profit for the financial year 2004-05, whereby he has calculated the daily net profit on average basis for the month of July 2005 and thereafter calculated the yearly profit by arbitrarily multiplying the daily profit with number of presumed working days in a year. 10.2 It has been submitted by the Ld. Authorised Representative in this regard that while making such an addition, the Ld. Assessing Officer has not only erred in law, but also ignored the following facts : That for calculating the profit for the F.Y. 2004-05 (A.Y. 2005-06), the Ld. Assessing Officer took the profi....

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....so observed that the Assessing Officer has not made any specific comments on this issue in her remand report dated 11.9.2008 except making a general remark that, however, in absence of any reliable evidence in support of the contention of assessee, reply cannot be accepted. The appellant was also not provided or confronted with the copies of computer sheets for the month of July, 2005 and the basis of arriving at a monthly profit of Rs. 2,68,743/- on the basis of which the impugned addition has been made in the assessment order. On calling for further report, it was stated by the Assessing Officer that the addition was made on the basis of survey report as reported by her predecessor. Copy of the survey report dated 21.10.2005 has also been enclosed. 10.6. On going through the survey report, it is observed that the assessment order is an ad verbatim reproduction of the survey report on this point. It is further observed that there is no basis whatsoever given in the survey report for estimating the net profit for the entire year on the basis of some rough calculations for one month only. It is also observed that in the survey report, the estimation of net profits by extrapolatio....

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.... the black diary was never in her possession. The entire addition was made, based on the survey report. In fact the AO was not handed over the black diary by her counter parts. b) The Ld. CIT(A) analyzed the entries on pages No. 2,4,99,101 of the alleged black diary and came to the conclusion that i) entries at page 101 are duplicate entries of the entries that are marked in bold at page No. 40, leading to double addition of an amount of Rs. 13 lacs in the hands of the assessee. ii) entries noted in page No. 2 pertained to 2004-05 and do not pertain to the current financial year iii) entries at page 99 demonstrate that they do not pertain to the assessment year 2005-06 . These entries aggregating to Rs. 7,12,775/- and belong to debtors who were the sub-agents of M/s. International Travels and these debtors are duly disclosed in the balance sheet. Ledger account copies of these parties were furnished in support of the fact that these entries do not belong to the assessee. c) the assesee passed away and it was the legal heir of the assessee who attended the assessment proceedings. The basis of making the addition and the material evidence based on which the addition was made we....