2016 (4) TMI 868

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..... In the course of survey proceedings, assessee, Managing Partner has declared an amount of Rs. 70 Lakhs as additional investment in the firm and Rs. 25 Lakhs each in the individual cases. In the return filed consequent to survey in the year, assessee however, did not disclose any amounts. As far as the firm is concerned, it has finalized its books of account and offered income of Rs. 18,01,200/-. Assessing Officer (AO) in the scrutiny while accepting that assessee's net profit disclosed works-out to 8.09 which is to some extent reasonable with the other cases on the same line of business, however, went on to disallow an amount of Rs. 10 Lakhs to cover the discrepancies in respect of expenses on the percentage of net profit on estimation basis. Further, AO also made an addition of Rs. 70 Lakhs on the basis of the declaration made in the course of survey of the amount of Rs. 70 Lakhs in the hands of the firm. Similarly, in the hands of the Managing Partner and his wife, AO made addition of Rs. 25 Lakhs even though assessee has objected to the same. It was the contention that there was no incriminating material impounded during the course of survey and the declaration made during the....

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....ccount and entries subsequent to the survey did not offer the income other than were arrived at as a profit in the Books of Accounts. It was the submission that there is no incriminating material at all, so the declaration so made has no basis. Further, it was submitted that the reasoning given by the CIT(A) that assessee waited for a full period of three years to go back and surrender is not correct as the survey took place on 09-09-2008 and assessee has completed the Books of Accounts on 31-03-2009 and returns were filed on 30-09-2009, based on the entries in the Books of Account. Therefore, there is no merit in argument of the Ld. CIT(A) with reference to assessee's submissions. It was the contention that Ld.AO and CIT(A) did not make the addition of Rs. 70 Lakhs on the basis of any material other than the statement during the course of survey. Ld. Counsel relied on various case law relied on by the assessee before the CIT(A) including that of the decision of the Hon'ble Supreme Court in the case of CIT Vs. S. Khader Khan Son [352 ITR 480] (SC) similar in facts. In the case of individual partners also, no incriminating material was found and could not be the basis for additi....

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....rough bank accounts or they are already recorded in the Books of Account. In view of this, assessees are not complying with the declarations so made in the course of survey. This has not been contradicted by any evidence. Therefore, we are of the opinion that there is no basis for making addition in the first instance. 7. Hon'ble Supreme Court in the case of CIT Vs. S. Khader Khan Son [352 ITR 480] (SC) (supra) has upheld the decision of the Hon'ble Madras High Court, in which it was held: "A survey was conducted in the premises of the assessee-firm. One of the partners in his statement offered an additional income of Rs. 20 lakhs for the assessment year 2001-02 and Rs. 30 lakhs for the assessment year 2002-03 but the statement was retracted by the assessee stating that the partner from whom the statement was recorded during the survey operation under section 133A of the Income tax Act, 1961, was new to the management and had agreed to an ad hoc addition. The Assessing Officer based on the admissions made by the assessee recomputed the assessment. The order was set aside by the Commissioner (Appeals) and this order was upheld by the Tribunal. On appeal to the Hi....

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.... CIT(A) after duly recording the objections of assessee on this, confirms the same holding as under: "6.1. During appeal proceedings, the appellant stated that such an estimated addition did not have any basis and it should be deleted. It was further added that all the expenses were supported by vouchers. 6.2. I have seen carefully the facts and evidence. Firstly, it is incorrect to state that all the expenses are properly vouched. In fact, as clearly mentioned in the assessment order, they were various discrepancies in the amounts and the expenses were not properly vouched. In fact a portion of the expenses had self-made vouchers without any details on what and whom the expenses were made on. It is clear that in order to avoid further scrutiny, the appellant made an offer of an agreed surrender on an estimated basis. Looking into the nature of vouchers, the assessing officer also agreed that if an amount of Rs. 10 lakhs was surrendered, it would meet the ends of justice. Accordingly, he agreed to the surrender and did not make any further scrutiny. 6.3. During appeal proceedings, the appellant could not substantiate the expenses in question. If the case ....