Sarjan Corporation v. Asstt. CIT

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The Tax Publishers2012 TaxPub(DT) 1948 (Ahd-Trib) : (2012) 014 ITR (Trib) 0140 INCOME TAX ACT, 1961 --Income from undisclosed sources--Addition under section 68Statement made by partner during survey--The assessee-firm was a builder and during this year, a survey action under section 133A was carried out. During the course of survey loose paper, etc., were impounded for further investigation and analysis. The assessing officer further noted that after the verification of impounded material and statements recorded, it is found that the assessee-firm's partner A, in his statement vide reply to question No. 31 stated that he was declaring undisclosed income of Rs. 1,80,00,000 over and above the firm's regular income for the assessment year 2005-06. The assessing officer further noted that while filing the return of income, the firm has not shown its regular income. The assessing officer held that there is clear-cut shortage of income declared and finally the returned income and the assessee has not filed any explanation in this regard. The assessing officer worked out that the regular income should have been 8 per cent. of turnover, i.e., at 8 per cent, of Rs. 2,01,48,210 = Rs. 16,11,857. He added the amount of Rs. 1,80,00,000 declared by the partner of the assessee and from such total, he reduced the income declared by the assessee, i.e., Rs. 1,75,35,320 and worked out that assessee has shown lesser income of Rs. 20,76,537. The addition was made by him by invoking the provisions of section 68. Out of the addition of Rs. 20,76,537, part relief was allowed by the Commissioner (Appeals). He held that it will be in the interest of justice if the assessing officer is directed to estimate the profit at 5 per cent. from regular business and in this manner, he allowed part relief to the assessee which is accepted by the revenue, since no ground has been raised in this regard. The assessee is disputing the part confirmation of this addition. Held: Additional income as disclosed by the partner during survey, could not be allowed as the same was disclosed in profit and loss account and audit report also, the same, therefore, was directed to be deleted. The addition made by the assessing officer of Rs. 20,76,537 out of which part relief has been allowed by the Commissioner (Appeals) who restricted the addition to Rs. 10,07,410. The assessing officer has not rejected the books of account and he has estimated the income on the basis that the assessee has failed to comply with the notices. It is observed by the Commissioner (Appeals) on page 3 of his order that in the present case, the assessee has shown net profit at 2.83 per cent, which is also confirmed by the audit report and profit as per books is required to be accepted. He further says that however, the voluntarily disclosed income is only Rs. 1,75,00,000 less by Rs. 5 lakhs to the disclosed amount of Rs. 1,80,00,000. Against this finding of the Commissioner (Appeals), it was submitted that no ground has been raised by the revenue in the appeal filed by it. Hence, no addition on this account is justified unless it is found that additional income declared by the assessee during the survey of Rs. 1,80,00,000 had not been shown by the assessee as additional income. On this aspect, as per profit and loss account available in the paper book, this amount of Rs. 1,80,00,000 has been shown in the income side. Profit before interest on partners' capital and partners' salary is shown by the assessee at Rs. 184.06 lakhs and the net income arrived at was Rs. 175.24 lakhs after allowing deduction of Rs. 1,81,369 on account of interest on partners capital and Rs. 7,00,000 on account of partners' salary. Hence, this additional income of Rs. 180 lakhs declared during the course of survey has been duly considered in the profit and loss account of the present year. In addition to that, there is Rs. 406,145.19 income declared by the assessee on account of regular business before interest on partners capital and partners salary and this finding is duly recorded by the Commissioner (Appeals) that profit as per books is required to be accepted and this finding of the Commissioner (Appeals) has not been challenged by the revenue as no such ground has been raised. Considering these facts, the addition confirmed is not sustainable in the present case. [Para 6] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 1948 (Ahd-Trib) : (2012) 014 ITR (Trib) 0140

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68Statement made by partner during survey--The assessee-firm was a builder and during this year, a survey action under section 133A was carried out. During the course of survey loose paper, etc., were impounded for further investigation and analysis. The assessing officer further noted that after the verification of impounded material and statements recorded, it is found that the assessee-firm's partner A, in his statement vide reply to question No. 31 stated that he was declaring undisclosed income of Rs. 1,80,00,000 over and above the firm's regular income for the assessment year 2005-06. The assessing officer further noted that while filing the return of income, the firm has not shown its regular income. The assessing officer held that there is clear-cut shortage of income declared and finally the returned income and the assessee has not filed any explanation in this regard. The assessing officer worked out that the regular income should have been 8 per cent. of turnover, i.e., at 8 per cent, of Rs. 2,01,48,210 = Rs. 16,11,857. He added the amount of Rs. 1,80,00,000 declared by the partner of the assessee and from such total, he reduced the income declared by the assessee, i.e., Rs. 1,75,35,320 and worked out that assessee has shown lesser income of Rs. 20,76,537. The addition was made by him by invoking the provisions of section 68. Out of the addition of Rs. 20,76,537, part relief was allowed by the Commissioner (Appeals). He held that it will be in the interest of justice if the assessing officer is directed to estimate the profit at 5 per cent. from regular business and in this manner, he allowed part relief to the assessee which is accepted by the revenue, since no ground has been raised in this regard. The assessee is disputing the part confirmation of this addition. Held: Additional income as disclosed by the partner during survey, could not be allowed as the same was disclosed in profit and loss account and audit report also, the same, therefore, was directed to be deleted.

The addition made by the assessing officer of Rs. 20,76,537 out of which part relief has been allowed by the Commissioner (Appeals) who restricted the addition to Rs. 10,07,410. The assessing officer has not rejected the books of account and he has estimated the income on the basis that the assessee has failed to comply with the notices. It is observed by the Commissioner (Appeals) on page 3 of his order that in the present case, the assessee has shown net profit at 2.83 per cent, which is also confirmed by the audit report and profit as per books is required to be accepted. He further says that however, the voluntarily disclosed income is only Rs. 1,75,00,000 less by Rs. 5 lakhs to the disclosed amount of Rs. 1,80,00,000. Against this finding of the Commissioner (Appeals), it was submitted that no ground has been raised by the revenue in the appeal filed by it. Hence, no addition on this account is justified unless it is found that additional income declared by the assessee during the survey of Rs. 1,80,00,000 had not been shown by the assessee as additional income. On this aspect, as per profit and loss account available in the paper book, this amount of Rs. 1,80,00,000 has been shown in the income side. Profit before interest on partners' capital and partners' salary is shown by the assessee at Rs. 184.06 lakhs and the net income arrived at was Rs. 175.24 lakhs after allowing deduction of Rs. 1,81,369 on account of interest on partners capital and Rs. 7,00,000 on account of partners' salary. Hence, this additional income of Rs. 180 lakhs declared during the course of survey has been duly considered in the profit and loss account of the present year. In addition to that, there is Rs. 406,145.19 income declared by the assessee on account of regular business before interest on partners capital and partners salary and this finding is duly recorded by the Commissioner (Appeals) that profit as per books is required to be accepted and this finding of the Commissioner (Appeals) has not been challenged by the revenue as no such ground has been raised. Considering these facts, the addition confirmed is not sustainable in the present case. [Para 6]