Telescoping of surrendered income against bogus sundry creditors appearing in books was wrong – ITAT

Allowing telescoping of surrendered income against bogus sundry creditors appearing in the books of accounts was wrong – ITAT

ABCAUS Case Law Citation:
ABCAUS 2966 (2019) (05) ITAT

The instant appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) in allowing telescoping and directing the AO to delete the addition or unexplained Gold/Diamond jewellery.

The respondent- assessee was an individual. There was search and seizure operation in the case of a group of companies, assessee was one of the director of the said companies.

The search and seizure operation was taken place even in the residential premises of the assessee. During the course of search and seizure operation following incriminating materials were found:

(i) Physical cash

(ii) jewellery

(iii) Silver articles

(iv) list of loan creditors   

Based on these incriminating materials assessment was completed by the Assessing Officer (AO) u/s 143(3) of the Income Tax Act, 1961 (’the Act) after making additions on account of  

(i) Unexplained cash u/s 69A

(ii) Unexplained value of jewellery & silver articles u/s 69A and

(iv) Unexplained income from unidentifiable sundry creditors.

Being aggrieved by the above additions, assessee preferred appeal before CIT(A), who vide impugned order allowed the appeal by directing the Assessing Officer to delete the additions on account of cash and jewellery  found giving him benefit of telescoping addition against the undisclosed income in respect of sundry creditors.

The Tribunal observed that the assessee had surrendered income against unproved sundry creditors appearing in the books of accounts. Therefore Commissioner of Income Tax (Appeals) had fell in error in granting benefit of telescoping surrender of undisclosed income against addition on account of explained cash, jewellery and silver articles.

The Tribunal held that the order of the ld. Commissioner of Income Tax (Appeals) was not based on the proper appreciation of evidences.

Therefore the Tribunal reversed the order of the Commissioner of Income Tax (Appeals) and restored the assessment order.

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