2010 (8) TMI 634 - HC - Income Tax

Addition - Undisclosed sources - Held that assessee had produced copies of accounts bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd. and had been maintaining books of account as per Companies Act - Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim - Appeal is dismissed

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal deleting addition of income from undisclosed sources made by Assessing Officer.

Analysis:
The appeal was filed by the revenue challenging the Income-tax Appellate Tribunal's order deleting the addition of Rs. 49,55,300 made by the Assessing Officer on account of income from undisclosed sources for the assessment year 2000-2001 under section 260A of the Income-tax Act, 1961. The respondent-assessee had filed a return declaring income of Rs. 4,024, which was processed under section 143(1) of the Act. Subsequently, based on information from the Investigation Wing, the Assessing Officer issued a notice under section 148 regarding the involvement of Ms MKM Finsec (P.) Ltd. in providing accommodation entries of Rs. 49,55,300. The respondent-assessee claimed to have purchased and sold shares through the said entity, earning a profit of Rs. 49,55,300 received through account payee cheques.

The Commissioner of Income-tax (Appeals) allowed the appeal filed by the respondent-assessee against the Assessing Officer's order. The revenue then appealed against the CIT(A)'s decision. The Income-tax Appellate Tribunal dismissed the revenue's appeal, noting that the assessee had provided all transaction details, including bills and contract notes, and the Assessing Officer had not verified these details or provided any findings of investigations. ITAT held that the addition made by the Assessing Officer lacked evidence, confirming the deletion by CIT(A).

The revenue contended that the ITAT erred in law by deleting the addition without establishing the genuineness of the transaction, identity, and creditworthiness of the parties. However, the court found that the assessee had produced accounts, bills, and contract notes from M/s. MKM Finsec Pvt. Ltd., maintained books of account as per the Companies Act, and demonstrated share transactions over time through balance sheets. The Assessing Officer had not verified the details provided by the assessee and acted solely on information from the Investigation Wing. The court concluded that the assessee had presented sufficient evidence to support its claim, rendering the addition unsustainable.

The court determined that the factual findings of the final fact-finding authority were not perverse or contrary to the record. Consequently, no substantial question of law arose in the appeal, which lacked merit and was dismissed without costs.