2018 (2) TMI 1990 - AT - Income Tax

Addition u/s 69C - Survey proceedings - expenditure which was found during the course of survey operation - assessee has filed revised return admitting additional income and the loss returned in the original return was reduced - as par AO admitted income was for the expenditure which was found during the course of survey operation and she made addition u/s 69C - CIT(Appeals) found that the additional income offered by the assessee was generated out of suppressed sales and found that the additional income cannot be set off against the business loss - HELD THAT - The assessee claims that the expenditure incurred by him was recorded in the books of account. When the expenditure was recorded in the books of account which was maintained in the course of regular business it cannot be said that the assessee could not explain the source of income for meeting such expenditure. Moreover admittedly the assessee has no other source of income other than business income. Therefore the source for meeting the expenditure is the business. The assessee has offered additional income during the course of survey operation. Therefore this Tribunal is of the considered opinion that the assessee had known source of income for meeting the expenditure. Hence the addition made by the Assessing Officer cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
Addition under Section 69C of the Income-tax Act, 1961.

Analysis:
The appeal was against the Commissioner of Income Tax (Appeals) order pertaining to the assessment year 2008-09. The main issue was the addition made by the Assessing Officer under Section 69C of the Income-tax Act, 1961. The assessee had filed a revised return admitting additional income of Rs. 75,00,000/- after a survey in their premises. The Assessing Officer made the addition under Section 69C, deeming the expenditure as undisclosed income. The assessee argued that the expenditure was recorded in the books of account, and the source of meeting it was from their business income, making Section 69C inapplicable. The Assessing Officer reopened the assessment based on an audit report, which the assessee contended was invalid. The Departmental Representative argued that the additional income offered during the survey operation was unexplained, justifying the addition under Section 69C.

The Tribunal considered both sides' submissions and found that the additional income offered during the survey operation was generated from suppressed sales. It was noted that the expenditure was recorded in the books of account, indicating a known source of income for meeting it, which was the business income. As the assessee had disclosed all relevant facts for assessment, including maintaining proper accounts, the addition made by the Assessing Officer was deemed unsustainable. Therefore, the Tribunal allowed the appeal, setting aside the orders of the lower authorities and deleting the addition made by the Assessing Officer.

In conclusion, the Tribunal ruled in favor of the assessee, highlighting that the expenditure was accounted for in the books of account and sourced from the business income, making the addition under Section 69C unjustified. The Tribunal emphasized the importance of proper record-keeping and disclosure of all relevant information for assessments, ultimately leading to the deletion of the addition made by the Assessing Officer.