INCOME TAX ACT, 1961

Section 153A

Search and seizure - Assessment under ection 153A - Addition on account liquor sales and estimation of undisclosed restaurant sales and profits thereon - No evidence in search and post search enquiry

The only issue for re-consideration in assessee's appeals was with regard to confirmation of addition on account of liquor sales in the absence of any incriminating material indicating undisclosed income. On the other hand, the issues for re-consideration in Revenue's appeals was with regard to consideration of income of Kwality Restaurant in the hands of the assessee, though the assessee leased the restaurant to the third party on rental basis and deletion of additions made on account of estimation of undisclosed turnover from restaurant business (excluding sales of Kwality Restaurant) and undisclosed liquor sales. AO observed that the assessee had suppressed its sales and profits in respect of sale of liquor, restaurant sales including sales of Kwality restaurant and the sales of cigarettes on regular basis. The profits in respect of such undisclosed sales were not declared either in the returns under section 139 or even in the returns filed under section 153A, after detection of suppression. CIT(A), held that the income of the assessee from undisclosed turnover of liquor can be reasonably estimated at Rs. 39,20,332 being 22% of suppressed turnover of Rs. 1,78,19,693 as estimated by the AO. CIT(A) directed the AO to restrict the addition of undisclosed income from restaurant business to Rs. 3,05,060 as against Rs. 17,56,400 made in the assessment order and grant appropriate relief to the assessee. The AO was also directed to bring to tax the rent receipt shown by the assessee in the return of income as received from Kwality Restaurant as the action of the AO of clubbing the income of Kwality Restaurant in the assessee's hands was not upheld.Held: It was an admitted fact that in the assessment years there was no incriminating material discovered in the course of search action and also no evidence of undisclosed income in the possession of AO so as to make any addition to the income declared by the assessee. If there is no allegation that the assessee had failed to produce books of account and documents in the course of original assessment, the addition made for the assessment year cannot be sustained. In the present case, there was no seized material found during the course of search to estimate the liquor sales, restaurant sales or income from M/s. Kwality Restaurant to sustain the addition. Even while conducting enquiry after search also, the AO had not come across any material which relates to the assessee so as to make addition in these assessment years. Tribunal could have confirmed the addition, had there been any post search evidence/material found by the AO. Neither seized material was found during the course of search nor any material found during the post search enquiry. There is also no allegation that the original assessment was found to be wrong in view of wrong claim made by the assessee. In other words, since the assessment was framed under section 153A read with section 143(3), the AO could make addition, which he could make under section 143(3), even without seized material. There was hardly any evidence to estimate turnover and income of Kwality Restaurant and club the same with the appellant for assessment years 2001-02 to 2006-07 and also for the period up to 31-12-2006 for assessment year 2007-08. Thus, the AO was not justified in clubbing the income of Kwality Restaurant in the hands of the assessee for the above period. In view of the above, estimation of undisclosed turnover from Kwality Restaurant and computing the undisclosed income on the same by the AO was not backed by any evidence and was purely a guess work and therefore, the addition worked out by the AO was to be deleted.

Distinguished:CIT v. Hotel Meriya (2011) 332 ITR 537 (Ker) : 2011 TaxPub(DT) 278 (Ker-HC).

REFERRED : PP Jose v. ACIT in IT(SS)A No. 31/Coch/2003, dt. 27-2-2004 (Coch-Trib), Rajnik & Co. v. ACIT (2001) 251 ITR 561 (AP) : 2001 TaxPub(DT) 1347 (AP-HC), CIT v. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) : 2017 TaxPub(DT) 3941 (SC), Pr. CIT v. Devangi alias Rupa (2017) 394 ITR 184 (Guj.) : 2017 TaxPub(DT) 1376 (Guj-HC), CIT v. Deepak Kumar Agarwal & Ors. (2017) 398 ITR 586 (Bom.) : 2017 TaxPub(DT) 4400 (Bom-HC), CIT v. Jagdish Narain Ratan Kumar (2015) 373 ITR 394 (Raj.-Jaipur) : 2015 TaxPub(DT) 2275 (Raj-HC), CIT v. SKS Ispat and Power Ltd. (2017) 398 ITR 584 (Bom.) : 2017 TaxPub(DT) 5003 (Bom-HC), Pr. CIT v. Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82 (Del.) : 2017 TaxPub(DT) 3839 (Del-HC), CIT v. Continental Warehousing Corporation (Nhavasheva) Ltd. (2015) 374 ITR 645 (Bom.) : 2015 TaxPub(DT) 2182 (Bom-HC), CIT v. Kabul Chawla (2015) 380 ITR 573 (Del.) : 2015 TaxPub(DT) 3486 (Del-HC), Pr. CIT v. Soumya Construction (P.) Ltd. (2016) 387 ITR 529 (Guj.) : 2016 TaxPub(DT) 3466 (Guj-HC), Pr. CIT v. Dipak Jashvantal Panchal (2017) 397 ITR 153 (Guj.) : 2017 TaxPub(DT) 4093 (Guj-HC) and Asstt. CIT v. SRJ Peety Steels (P) Ltd. (2011) 53 DTR (AT) 347 (Pune) (2017) 137 TTJ (Pune-Trib) 627 : 2011 TaxPub(DT) 670 (Pune-Trib).

FAVOUR : In assessee's favour.

A.Y. : 2001-02 to 2007-08

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