1995 (4) TMI 75 - AT - Income Tax

Addition To Income Amnesty Scheme Assessing Officer Partnership Firm Revised Return Search And Seizure

Issues Involved:
1. Applicability of the Amnesty Scheme to the declared income.
2. Addition of Rs. 4,01,919 as allegedly undisclosed sales.
3. Addition of Rs. 81,110 as unexplained payments.
4. Deletion of Rs. 2,20,974 on account of alleged purchases at higher prices from sister concerns.

Detailed Analysis:

1. Applicability of the Amnesty Scheme to the Declared Income:
The primary issue revolved around whether the Amnesty Scheme could be applied to Rs. 1,87,500 out of Rs. 2,25,000 declared by the assessee and whether interest under section 215 should be levied on this amount. The CIT(A) allowed the benefits of the Amnesty Scheme on Rs. 1,87,500 but disallowed it on Rs. 37,500, interpreting that 1/6th of Rs. 2,25,000 was the income of the year in question. The assessee argued that the benefits should apply to the entire amount of Rs. 2,25,000, as the facts and circumstances that led to the partial relief equally applied to the remaining amount. The Tribunal concluded that the revenue had not taken any action for almost two years after the search, and merely seizing papers and recording statements did not constitute detection. Referring to the Calcutta High Court's judgment in Anand Kumar Saraf v. CIT, the Tribunal held that the assessee was entitled to the benefits of the Amnesty Scheme on the entire amount of Rs. 2,50,000, as the disclosure was voluntary and not after detection.

2. Addition of Rs. 4,01,919 as Allegedly Undisclosed Sales:
During the search at the residence of a partner, a diary was seized indicating financial transactions. The ITO interpreted a page from the diary as reflecting undisclosed sales by the assessee-firm to the partner, adding Rs. 4,01,919 as undisclosed sales. The CIT(A) deleted this addition, stating that the notings were undecipherable and did not link the assessee-firm to any sales. The Tribunal upheld this deletion, noting that the diary did not mention the assessee-firm and that the transactions recorded were admitted by the partner as his own financial dealings. The Tribunal found no corroborative evidence to support the ITO's interpretation and cited the Bombay High Court judgment in Addl. CIT v. Miss Lata Mangeshkar, emphasizing that mere entries in a third party's accounts were insufficient to prove transactions by the assessee.

3. Addition of Rs. 81,110 as Unexplained Payments:
Similar to the above issue, the ITO added Rs. 81,110 as unexplained payments to the partner based on entries in the seized diary. The CIT(A) deleted this addition, and the Tribunal upheld the deletion, reiterating that the entries in the diary did not establish any payments by the assessee-firm. The Tribunal emphasized that the diary's entries were related to the partner's financial transactions and did not bind the assessee-firm.

4. Deletion of Rs. 2,20,974 on Account of Alleged Purchases at Higher Prices from Sister Concerns:
The revenue challenged the deletion of Rs. 2,20,974, alleging that the assessee purchased goods from sister concerns at prices higher than the market rate. Both parties agreed that the facts were identical to those in the case of Prabhat Oil Mills Kadi, a sister concern of the assessee-firm. The Tribunal referred to its decision in that case and confirmed the CIT(A)'s finding, dismissing the revenue's ground.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, granting the benefits of the Amnesty Scheme on the entire amount of Rs. 2,50,000 and upholding the deletions of the additions made by the ITO. The Tribunal emphasized the lack of action by the revenue post-search and the absence of corroborative evidence linking the assessee-firm to the alleged undisclosed sales and payments.

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