DCIT CENTRAL CIRCLE- 8, NEW DELHI vs. VATIKA LIMITED, GURGAON

The appeal has been preferred by the Revenue against the order dated 14.11.2019 of CIT(A)-24, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 436/18-19 arising out of an appeal before it against the order dated 30.12.2018 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Central Circle--08, New Delhi (hereinafter referred as the Ld. AO).

623.Del.2020 M/s Vatika Ltd. furnished return of income on 30.11.2017 at loss of Rs. 5,73,81,96,994/- along with its annual audited accounts. During the pendency of the assessment a search took place on the company on 17.10.2016. The Ld. AO issued a notice u/s 142(1) of the Income Tax Act on 26.07.2018 directing assessee to furnish return of income for the assessment year. Assessee submitted vide submissions dated 07.08.2018 that its return of income filed earlier on 30.11.2017 be considered. Thereupon notice u/s 143(2) of the Act was issued and the ld. AO had made an addition of Rs. 34,76,00,000/- on account of undisclosed profits. The same has been deleted by the Ld. CIT(A), therefore, the Revenue is in appeal raising following grounds :-

“1. The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 34,76,00,000/- even though the same had been made on the basis of incriminating material discovered during the search at the assessee’s premises. 2. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal.”

3. Heard and perused the record.

4. Ld. DR supported the findings of Ld. AO and submitted that Ld. AO had rightly taken into consideration the statements and incriminating material. It was submitted that addition is on account of undisclosed profits and retrun of higher revenue is of no consequence.

5. On behalf of the assessee it was submitted that the addition has been made on the basis of a document found at the time of search which only reflected projected income for A.Y. 2017-18. It was submitted that the projected revenue mentioned in this paper is Rs.55587.30/- loss while actual revenue earned and reflected in profit and loss account is more at Rs. 66769.34/- lakhs. It was submitted that in these circumstances, the documents cannot be said to be incriminating document as what has been shown as projected income found its 623.Del.2020 M/s Vatika Ltd.

place on enhanced basis in the books and reported in the return. It is submitted that Ld. CIT(A) has duly appreciated the facts of the case that projected income has been made basis for addition while the assessee has reported higher income of the finalization of accounts. It was submitted that the accounts on the basis of which return of income has been filed having accepted, then no additions on the basis of projected income can be made.

conclude that the assessee has escaped from paying any tax on the surrendered income without analyzing the reasons for lower reported profits than the projected one. What ld. AO erred was to consider the surrendered projected income to be undisclosed income while in audited financials the surrendered projected income had found its place. Ld. CIT(A) has made no error in considering that during the search or otherwise it was not established that the assessee is not disclosing true income or claiming not genuine expenditure. In that case based upon the profitability projections, the addition is not justified.