INCOME TAX ACT, 1961

Section 69

Income from undisclosed sources - Addition under section 69 - Additions on account of peak unaccounted investment and on account of GP on unaccounted purchases - Absence of any documentary evidence

A search in case of assessee-firm was undertaken by Directorate of Revenue Intelligence (DRI). In course of the search, one of the partners of the firm, admitted before the DRI regarding undervaluation of goods pertaining to the year under consideration. He admitted that the difference of the undervalued amount was paid in cash to the seller firm at China and Japan. Accordingly, the AO made addition on account of peak unaccounted investment and addition on account of GP on unaccounted purchases. Held: AO did not mention about any independent finding for making the impugned additions. He simply relied upon the information and evidences received from the customs department regarding the raid conducted by the officers of DRI. Further, after receiving information from the customs department, the AO ought to have carried out the inquiries but it appeared that no such exercise was done by the AO. Further, the DRI made up the case only on the basis of confessional statement of the assessee recorded under section 108 of the Customs Act and there was no other material except such statement. Further, in absence of any documentary evidence, no addition could be made on the action of third party i.e. the DRI. Hence, the impugned additions were liable to be deleted.

REFERRED : Kailashben Manharlal Chokshi v. CIT (2010) 328 ITR 411 (Guj): 2010 TaxPub(DT) 0190 (Guj-HC) and M/S Bannalal Jat Constructions Pvt. Ltd. v. ACIT (2019) 106 taxmann.com 128 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2007-08

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