The Madhya Pradesh High Court has held that the unexplained investments were made by the Assessing Officer merely on the basis of the statements given during the course of the survey and that there is no incriminating material or documentary evidence available with the Assessing Officer to substantiate the said additions for the assessment year.
The assessee filed its return of income for the assessment year 2007-08 declaring a total income of Rs.1,41,350/-. A survey action under Section 133A of the Act was carried out on the business premises of the assessee.
Wherein undisclosed income of Rs.60.00 Lac on account of underhand transactions in the purchase of land as well as excess cash was found. Such a statement of one of the partners of the assessee firm, namely, Shri Prem Kumar Agrawal was recorded on oath.
The assessment under Section 143(3) of the Act was completed by the Assessing Officer on the total income of Rs.5,10,56,000/-, who added an amount of Rs.23,02,500/- on account of unexplained investment under Section 69 in purchase of land; Rs.28,97,500/- towards unexplained investment in the properties as per statement of the partner; Rs.8,03,142/- towards unexplained money u/s 69A; Rs.3,72,79,410/- towards suppressed sales; Rs.65,67,600/-.
On account of unexplained cash credits and an amount of Rs.10,64,500/- was added on account of bogus credit entries in the books as well as excess unaccounted money charged from the customers.
The assessee filed an appeal before the Commissioner of Income Tax (Appeals), who partly allowed the same and deleted the aforesaid additions of Rs.23,02,500/- and Rs.28,97,500/- holding that certain additions were made only on the basis of statement whereas the Assessing Officer was obliged to corroborate the addition with any other material, incriminating material during the assessment proceedings.
Similarly, the addition made by the Assessing Officer to the tune of Rs.3,72,79,410/- on account of suppressed sales was restricted to Rs.17,05,082/- after adjusting the net profit already shown by the appellant, on an appreciation of various judicial pronouncements and detailed reasons assigned in the order
It was reasonable if net profit @ 8% was applied on estimated sales of Rs.2.5 Crores in place of 1.60% shown by the appellant in the return because net profit shown by the appellant was on lower side considering its line of business.
Further, the addition made by the Assessing Officer to the tune of Rs.65,67,600/- towards unexplained cash credits was reduced to Rs.35,37,500/- as the appellant had furnished the copies of the sale deeds and proof of repayment of the remaining amount of Rs.30,30,100/-.
As regards the addition of the amount of Rs.10,64,500/- for bogus credit entries, the said amount was also restricted by the CIT(A) to Rs.3,30,000/- on the basis of the incriminating material on record revealing that the remaining accounts amounting to Rs.7,34,500/- were substantiated by proof of refund through banking channel, copies of registers, cash receipt vouchers, and money receipt, etc. which were also got verified along with the books of accounts.
Thereafter, dissatisfied with that order, the Revenue filed an appeal before the Tribunal. The assessee also preferred an appeal being aggrieved by a part of the order of the Commissioner of Income Tax (Appeals) CIT(A). The Tribunal dismissed both the appeals thereby upholding the findings of the Commissioner of Income Tax (Appeals) CIT(A).
The division bench comprising of Chief Justice Ajay Kumar Mittal and Justice Vijay Kumar Shukla observed that the findings recorded by the Commissioner of Income Tax (Appeals)CIT(A) and upheld by the Tribunal on the issues raised in the present appeal are based on an appreciation of evidence on record.
While dismissing the appeal of Principal Commissioner of Income Tax, the bench further observed that the Revenue has failed to point out as to how and in what manner such findings of fact are illegal or perverse.
