ACIT Vs Mohd. Ayub Mohd. Yaqub Perfumers Pvt. Ltd. (ITAT Lucknow)
The Income Tax Appellate Tribunal (ITAT), Lucknow Bench, has dismissed an appeal filed by the Assistant Commissioner of Income Tax (ACIT) against Mohd. Ayub Mohd. Yaqub Perfumers Pvt. Ltd. for the assessment year 2004-05. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to annul the reassessment order, finding that the Assessing Officer (AO) lacked concrete evidence to establish a link between a seized third-party document and the assessee-company.
Case Origin: Third-Party Search and Ambiguous Entry
The dispute originated from a search operation conducted on Shri Sohanraj Mehta, a C&F agent of the RMD Gutkha group, in Bangalore. During this search, a statement of account was seized, which contained an entry of Rs. 50 lakhs against the name “Malik Kannauj.” The revenue interpreted this entry to mean that the amount was paid to Shri Abdul Malik, the Managing Director (MD) of Mohd. Ayub Mohd. Yaqub Perfumers Pvt. Ltd., located in Kannauj.
Based on this interpretation of the seized document, the AO formed a belief that income chargeable to tax had escaped assessment in the assessee-company’s hands, as this Rs. 50 lakhs was not reflected in its books of account. Consequently, a notice under Section 148 of the Income-tax Act, 1961, was issued, and the assessment was completed under Section 147 read with Section 144 of the Act. This resulted in an addition of Rs. 10.48 lakhs, representing the estimated profit on the alleged unaccounted sale of Rs. 50 lakhs.
