2011 (5) TMI 681 - AT - Income Tax

Additions on account of income from unaccounted sales and unaccounted commission - statement partner was recorded at the time of survey in which he admitted that the commission income and the cash sales were not reflected in the regular books of accounts - order rejected the allegation of the assessee that the entries were cooked up and that one of the staff members had been forced to write the entries - Part of the entries found on these papers have been found to be recorded in the books of account - document found cannot be taken as partly correct and partly incorrect - addition has been only in relation to the entries not recorded in the books of account - no infirmity in the order of CIT(A) confirming the addition in relation to entries not recorded on the books and the same is therefore upheld - appeal of the assessee is dismissed

Summary

Issues Involved:
1. Addition on account of income from unaccounted sales.
2. Addition on account of unaccounted commission income.
3. Allegation of forcible extraction of the statement by the survey party.

Issue-wise Detailed Analysis:

1. Addition on Account of Income from Unaccounted Sales:
The case involved a survey conducted on 18.2.2005 under section 133A at the premises of the assessee firm, which was engaged in importing and trading chemicals. During the survey, loose papers were found showing unaccounted cash sales totaling Rs.19.95 lacs. The partner of the firm admitted that these sales were not reflected in the regular books of accounts. However, in the return filed on 28.3.2006, the assessee did not disclose the additional income, and an affidavit was submitted alleging that the documents were forcibly prepared by the survey team. The Assessing Officer (AO) rejected these allegations, noting that the assessee had not complained immediately and had even requested installment facilities for paying the additional tax. The AO made an addition of Rs.9.75 lacs on account of unaccounted sales and Rs.24,539/- on account of gross profit. The CIT(A) confirmed these additions. The tribunal upheld the CIT(A)'s order, rejecting the claim of forcible extraction and treating the loose papers as valid evidence of unaccounted sales.

2. Addition on Account of Unaccounted Commission Income:
Loose papers found during the survey also showed commission income of Rs.26,96,797/- and Rs.40,18,324/-. The partner admitted that these were not reflected in the regular books. The AO added Rs.8,62,245/- and Rs.11,23,980/- as unaccounted commission income based on these papers. The assessee argued that these entries were fabricated and forced by the survey team. However, the CIT(A) rejected these claims, noting that part of the entries was recorded in the books, indicating the authenticity of the documents. The tribunal upheld the CIT(A)'s decision, confirming the addition of unaccounted commission income as the documents could not be partly correct and partly incorrect.

3. Allegation of Forcible Extraction of the Statement by the Survey Party:
The assessee claimed that the survey team had forced the partner and staff to prepare and sign the documents showing unaccounted sales and commission income. The AO and CIT(A) both rejected these allegations, noting the lack of immediate complaint and the request for installment facilities shortly after the survey. The tribunal also found no merit in the claim, emphasizing that the affidavits retracting the statements were self-serving and made six months after the survey. The tribunal concluded that the documents were genuine and the allegations of forcible extraction were an afterthought.

Conclusion:
The tribunal dismissed the appeal of the assessee, upholding the additions made by the AO and confirmed by the CIT(A) on account of unaccounted sales and commission income. The allegations of forcible extraction of statements were rejected due to lack of evidence and the timing of the retraction. The order was pronounced in the open court on 11.05.2011.