2023 (10) TMI 622 - AT - Income Tax

Unexplained expenditure u/s 69C - Addition emanated from noting in a diary found during search conducted on the assessee s premises - CIT(A) deleted addition - HELD THAT - There was no categorical admission by the assessee of the notings in the diary as all pertaining to him in his personal capacity on the contrary he had stated that it related to his business also. CIT(A) has found that all income relating to entries noted in the diary stood disclosed by the partnership to and accepted by the settlement commission. This fact is not disputed before us - we agree with the CIT(A) that the objection of the ld.Pr.CIT to the ITSC being overruled by acceptance of income by ITSC the said objection was irrelevant to merit any consideration while framing assessment in the hands of the assessee. Where the assessee had stated the notings in the diary as relating to his business and which stood disclosed by its partnership firm to the settlement commission who in turn accepted the same also we find no reason to interfere in the order of the CIT(A) deleting the addition made in the hands of the assessee finding the said income to be doubly assessed to taxed. Decided in favour of assesse.

Summary

Issues Involved:
1. Deletion of addition made by the AO on account of unexplained expenditure under section 69C.
2. Whether the impugned amount had already been surrendered by the partnership firm in its settlement application.
3. Whether adding the same amount in the hands of the assessee would tantamount to double addition.
4. Whether the assessee had admitted to the transactions as pertaining to his unaccounted income and expenditure.

Summary:

Issue 1: Deletion of Addition Made by AO on Account of Unexplained Expenditure under Section 69C
The appeal was filed by the Revenue against the deletion of an addition of Rs. 2,54,73,420/- made by the AO under section 69C of the Income Tax Act, 1961. This addition emanated from notings in a diary found during a search at the assessee's premises, which allegedly contained details of receipts and payments. The AO did not accept the assessee's claim that this income was already disclosed by the partnership firm, M/s. Laxmi Constructions, in its settlement petition.

Issue 2: Surrender of Impugned Amount by Partnership Firm in Settlement Application
The assessee argued that the total of notings in the diary amounted to Rs. 3,91,33,420/-, which after eliminating duplicate entries, came to Rs. 2,54,73,420/-. The partnership firm had surrendered Rs. 1,66,98,800/- to the Settlement Commission, which was accepted. The AO, however, made an addition of Rs. 2,54,73,420/- to the income of the assessee, despite the firm's surrender.

Issue 3: Double Addition
The CIT(A) noted that the impugned amount had already been surrendered by the partnership firm and accepted by the Settlement Commission. Adding the same amount again in the hands of the assessee would result in double taxation, which is not permissible under the Act. The CIT(A) found that the assessee had not admitted the amount as pertaining to him in his individual capacity and deleted the entire addition.

Issue 4: Admission of Transactions by Assessee
The Revenue argued that the assessee had admitted to the transactions as pertaining to his unaccounted income and expenditure. However, the CIT(A) found that the assessee did not categorically admit the notings as relating to him personally. The assessee had stated that the notings related to his business, which was disclosed by the partnership firm to the Settlement Commission.

Conclusion:
The CIT(A) concluded that the income relating to the entries in the diary was already disclosed by the partnership firm and accepted by the Settlement Commission. Therefore, adding the same amount to the assessee's income would result in double taxation. The appeal of the Revenue was dismissed, and the deletion of the addition by the CIT(A) was upheld. The grounds raised by the Revenue were rejected, and the order was pronounced on 11th October 2023 at Ahmedabad.