Mere not recording of transactions not make them undisclosed if entries are verifiable from other primary records

Mere not recording of transactions not make them undisclosed if entries are otherwise verifiable from other primary books. High Court upheld ITAT judgment

ABCAUS Case Law Citation:
ABCAUS 2142 (2017) (12) HC

The Challenge/Grievance:
The instant appeal was filed by the Income Tax Department (the Revenue/Department) against the order/judgment passed by the Income Tax Appellate Tribunal (ITAT) deleting the additions made by the Assessing Officer (AO) on account of undisclosed income under block assessment.

Brief Facts of the Case:
A search and seizure operation was conducted by the Revenue. During the block assessment, inter alia the following additions were made by the Assessing Officer (AO).

• Cash payments made which were not found not entered in the cash books of the respective years and added back as undisclosed income in the block period
• Payment related to purchase of land found to be unexplained Expenditure
• Unexplained payments made to the financer

On appeal by the assessee, the ITAT deleted the additions Aggrieved by the order of the Tribunal, the Revenue was before the High Court inter alia disputing the deletions made.

Observations made by the High Court:

The Hon’ble High Court observed that The cash book of the assessee was made up to the date of search. The assessee had stated before the Tribunal that he filed copies of his regularly disclosed bank accounts which clearly showed huge cash withdrawals for making the payments. All such bank accounts were stated to be old accounts and were part of the regular accounts of the assessee for past years, the returns in respect of which had duly been submitted prior to the search.

The Hon’ble High Court  noted that the Tribunal was of the view, inter alia, that if the recordings of the regular books of accounts be not up to date, that does not mean the entries, which can otherwise be verified from other primary books, would relate to undisclosed income of the assessee for the purpose of block assessment.

The Hon’ble High Court  observed that in view of the Tribunal, the impugned payments/transactions pertained to the regular business process of the assessee which stood disclosed before the department. The ITAT held that simply because some transactions were not recorded in some of the seized documents, per se, they do not become undisclosed transactions.

The Hon’ble High Court  observed that the assessee had explained the expenditure as out of huge cash withdrawals made by him. On that basis the Tribunal was of the opinion the transactions under consideration formed part of the regular books of accounts of the assessee and therefore this addition was deleted.

The Hon’ble High Court  opined that the Revenue was unable to demonstrate that this opinion of the Tribunal, on the facts noted by it, was perverse.

Decision/ Conclusion/Held:
The question framed were answered in favour of the assessee.