Insufficient Evidence for AO’s Addition: Bombay HC dismisses Income Tax Appeal [Read Order]

In a recent ruling, the Bombay High Court dismissed the income tax appeal, citing the materials on record does not justify such additions of the Assessing Officer.

A search and seizure action under Section 132 of the Income Tax Act, 1961, was carried out in the case of the Assessee on 21.04.2010. Notice under Section 153A of the Income Act, 1961 dated 04.08.2010 was issued and served on the Assessee calling for return of income for the aforesaid Assessment year.

The Assessee filed Return of Income on 30.09.2010 declaring total income of Rs.54,51,02.479/-. The assessee filed revised return of income on 13.12.2012 declaring total income of Rs.53,88,63.191/-.

The Assessing Officer was of the opinion that the return filed on 13.12.2012 is not a valid one since as per the provisions of Section 139(5), a revised return can be filed at any time before the expiry of one year from the end of the relevant Assessment year or before the completion of the assessment whichever is earlier and, as such, before 31.03.2012 for the relevant Assessment year.

As such, the revised return was treated as non-existent and the assessment was completed based on the return filed on 30.09.2010. The Assessing Officer completed the search assessment under Section 153A on 31.12.2012 determining the total income of the assessee at Rs. 58,79,56,793/- for the Assessment Year 2010-11 inter alia making additions under two heads viz. unexplained expenditure of Rs.2,28,54,314/- and Rs. 2,00,00,000/-, the first representing general expenses and the second representing legal expenses.

Ms. Amiri Razaq representing the assessee urged that the impugned Order is contrary to the provisions of the Act and is against the well settled interpretation of the relevant cited provisions.

Mr. Naik representing the respondents submitted that the findings recorded are findings of facts which cannot be said to be perverse.

The Court examined the findings of both the Tribunal and the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal's order extensively referenced the observations and conclusions of the CIT (A). Regarding the dispute over an addition of ₹2, 25, 54,314, the Tribunal's determination was based on the evidence presented. It concluded that group companies had declared income related to unexplained expenditure for the Assessment Year 2007-08, totaling ₹2, 28, 54,314, which served as a plausible explanation.

The Tribunal also noted that the tax department failed to provide any evidence to counter the assessee company's claims. Moreover, the Tribunal found that the CIT (A)'s order was well-reasoned. It was highlighted that the assessee company had submitted an affidavit supporting its position, which the Assessing Officer did not refute, nor did the officer conduct any further investigation. The Tribunal criticized the Assessing Officer for assuming that the entries in the seized diary related solely to the Assessment Year 2010-11, based only on presumption, and upheld the CIT (A)'s findings, finding no fault in the Tribunal's reasoning.

Thus, the division bench comprising Justice Valmiki Menezes and Justice M.S. Karnik held that both the CIT (A) and the tribunal had found that the materials on record do not substantiate the Assessing Officer's additions. Their findings, grounded in fact, are deemed reasonable and not perverse. Consequently, the Tribunal upheld the CIT (A)'s decision. Hence, the Tax Appeal was dismissed.

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