The assessee challenged the reopening on the ground that approval under section 151 ought to have been granted by the Principal Chief Commissioner and not by the Director General. The Tribunal held that, since the Principal Chief Commissioner had no jurisdiction over the Central Charge or the Director General concerned, the sanction granted by the jurisdictional Director General was valid and in accordance with section 151. Pursuant to search, seized diaries revealed undisclosed cash transactions in the nature of loans and advances exceeding the monetary threshold prescribed under section 149(1)(b). The Tribunal held that such loans and advances constituted “assets” within the meaning of Explanation 2 to section 153A and the corresponding provision in section 149(1)(b). Accordingly, the reopening of assessment was valid and not barred by limitation.\u00a0 The Tribunal held that search assessments assigned to the Central Charge are outside the scope of the faceless assessment scheme. Consequently, the jurisdictional Assessing Officer was competent to initiate and complete the reassessment proceeding. The assessee admitted during the search that the seized handwritten diaries belonged to him and contained details of his cash transactions. The Tribunal held that, in the absence of any material identifying the diaries as belonging to family members or group concerns, the subsequent retraction was not acceptable. The Tribunal held that the tally books prepared after the search contained substantial alterations, including removal of notional interest, merger of family accounts and additional claims for bad debts. As they did not faithfully reflect the seized diaries, the Assessing Officer rightly rejected the tally books and determined the income on the basis of the seized diaries.\u00a0 The Assessing Officer estimated the assessee’s profit from land trading at 35 per cent. of the credits recorded in the seized diaries. The Tribunal held that the estimate was excessive and, considering the assessee’s own average profit ratio of 13.14 per cent. reflected in the seized records, directed the Assessing Officer to apply that rate.\u00a0 The Tribunal found no basis for the Assessing Officer’s estimate of 20 per cent. profit on share trading transactions recorded in the seized diaries. It directed that income be computed by applying a net profit rate of 8 per cent. on the total credits, considering the nature of the transactions and the statutory presumptive scheme. The Tribunal held that the Maal Khaate ledger contained both credit and debit entries and could not be treated as representing net profit. Rejecting the Commissioner (Appeals)’ estimate of 20 per cent., the Tribunal directed estimation of income at 10 per cent. of the total credits, considering the turnover and nature of the business. The Tribunal held that, while peak credit should be computed ledger-wise in the absence of identification of individual parties, the assessee was entitled to telescoping of income already assessed in earlier years against the peak addition made in subsequent years. The Tribunal held that no bad debts had been written off in the seized diaries and the claim was raised only in the tally books prepared subsequently. As the tally books were rightly rejected and the statutory requirements for deduction were not satisfied, the claim for bad debts was disallowed. The Tribunal held that the accrued interest entries recorded in the seized diaries were merely notional and that actual interest had already been brought to tax on receipt basis. Taxing the notional interest separately would result in double taxation. Accordingly, the deletion of the addition by the Commissioner (Appeals) was upheld.\u00a0\u00a0 The Tribunal held that the seized diaries for earlier years formed an integral part of the evidence and the opening cash balance recorded therein could not be ignored merely because assessment for those years had become time-barred. The matter was restored to the Assessing Officer for recomputation of the negative peak cash balance after considering the opening balances reflected in the seized diaries. The Tribunal held that only the undisclosed income arising from the unexplained transactions and not the entire undisclosed receipts could be brought to tax. The Commissioner (Appeals) rightly adopted the peak credit method after excluding entries already considered under other heads and deleted protective additions relating to family members.(AY. 2013-14 to 2021-22).<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 151 : Reassessment-Sanction for issue of notice-Search cases-Search assessment-Approval by Director General having jurisdiction over Central Charge-Sanction valid.-CBDT Notification No. 68 of 2014, dated 13-11-2014-Escaped income represented by asset exceeding Rs. 50 lakhs-Reopening not barred by limitation-Central Charge-Assignment outside faceless assessment scheme-Jurisdictional Assessing Officer competent to complete assessment-Seized diaries-Statement under section 132(4) admitting ownership-Subsequent plea that diaries belonged to family members rejected-Seized diaries-Tally books subsequently prepared not reliable-Profit to be determined from seized diaries-Land trading-Estimation of profit-Profit rate of 13.14 per cent. held reasonable-Share trading-Estimation of profit-Profit rate of 8 per cent. on total credits directed-Trading account (Maal Khaate)-Income estimated at 10 per cent. of total credits–Peak credit-Telescoping of income assessed in earlier years-Benefit allowable-Bad debts-Claim not reflected in seized diaries-Deduction not allowable–Accrued interest-Notional entries in seized diaries-Double taxation avoided-Addition deleted-Negative peak cash balance-Opening balances of earlier years to be considered-Matter restored-Miscellaneous cash transactions-Only undisclosed income taxable-Peak credit method upheld. [S.28(i), 36(1)(vii), 44AB,44AD, 69, 69A, 115BBE, 132, 132(4), 147, 148, 149(1)b), 153A] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[21],"tags":[],"class_list":["post-63882","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-gCm","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/63882","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=63882"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/63882\/revisions"}],"predecessor-version":[{"id":63883,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/63882\/revisions\/63883"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=63882"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=63882"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=63882"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}