2013 (5) TMI 870 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of additions made by Assessing Officer on account of capital account and remuneration paid to non-working employees of the proprietary firm of the assessee based on surrender made during survey u/s 133A.

Capital Account Addition:
The revenue appealed against the deletion of additions made by the Assessing Officer on the capital account of the assessee. The survey u/s 133A revealed a surrender by the assessee of Rs. 1,07,69,764 on account of difference in capital and Rs. 5,64,000 on account of remuneration paid to non-working employees. The Assessing Officer reopened the case, and the legal heir of the deceased assessee submitted that she was unaware of the business affairs and financial situation. The Assessing Officer disregarded the explanation and made the additions. The CIT(A) deleted the additions, emphasizing that the survey statement alone cannot be the basis for additions without proper appreciation of facts. The reconciliation statement and supporting documents provided by the legal heir were not considered by the Assessing Officer, leading to an unjustified addition.

Remuneration Addition:
Regarding the remuneration paid to non-working employees, the CIT(A) held that there was no basis for disallowance as the employees had been working, had income tax assessments, and PF deductions were made. The Assessing Officer failed to establish that the salary claims were not genuine. The revenue appealed against the CIT(A)'s decision.

Judgment:
The Tribunal dismissed the revenue's appeal, noting that the original assessment was completed before the survey, and all facts were available to the Assessing Officer. The Tribunal referred to legal precedents stating that additions based solely on survey statements are not valid without corroborating evidence. Detailed reconciliation of the capital account was provided with supporting documents, showing legitimate transactions. The Tribunal found no evidence of unaccounted money and upheld the CIT(A)'s decision on both the capital account and remuneration additions.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the additions made by the Assessing Officer on the capital account and remuneration paid to non-working employees, emphasizing the importance of proper evidence and legal precedents in making such additions.