The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that mere determination of the income based on surmise and conjecture is grossly illegal.
The assessee had filed his original return of income declaring income of Rs. 8,15,530/-. This income was processed under Section 143(1) of the Income Tax Act.
A search and seizure operation was carried out at the various premises of Bajaj Group and a search warrant was issued in the name of the assessee.
The Assessing Officer (AO) issued a notice under Section 153A of the Income Tax Act directing the assessee to file a return. The assessee vide letter replied that the return of income originally filed may be treated as a return in response to the notice issued under Section 153A of the Income Tax Act.
During the course of search assessment proceedings under Section 153A of the Income Tax Act, the AO issued notice 142(1) of the Income Tax Act by alleging that the assessee has rendered election consultancy services and has earned income of Rs. 6,61,50,000/- based on internal e-mail which was extracted from the laptop seized during the search.
The AO ignored these submissions of the assessee and proceeded to add the income in the sum of Rs. 6,61,50,000/- on the presumption that the assessee had rendered these services and earned corresponding income thereon.
The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition on the ground that AO had made this addition merely based on surmises and conjectures and without appreciating any corroborative evidence on record.
The Authorized Representative submitted that email found during the course of a search conducted in some other premises wherein only the scope of services to be rendered was discussed together with the fee thereon.
The said email nowhere stated that services had been rendered by the assessee and the assessee is entitled to the consultancy income.
The Assessing Officer had concluded that the assessee had rendered election-related services and earned consultancy income of Rs. 5,25,000/- per constituency and added to the assessment. The consultancy charge of Rs. 5,25,000/- is merely an average of figures of Rs. 4,25,000/- and Rs. 6,25,000/- mentioned in the email which has been considered by the Assessing Officer.
The email does not specify anywhere that the assessee had indeed rendered consultancy services for all the constituencies that are relevant for Assam Legislative Elections.
Hence, this very clearly goes to prove that extrapolation has been done by the Assessing Officer by taking a single piece of information contained in the email and alleging that the assessee had rendered services for all the election constituencies in Assam.
The Two-bench member comprising of Kul Bharat (Judicial member) and M. Balaganesh (Accountant member) held that the determination of income based on surmise and conjecture is grossly illegal and incorrect on the part of the Assessing Officer.
Thus, the appeal of the revenue was dismissed.
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