2014 (11) TMI 1006 - AT - Income Tax

Addition on account of promissory note found at the time of search - telescoping benefit to assessee - Held that - The assessee has filed detailed source and application of undisclosed income of the assessee at page no.56 of its compilation wherein after application of the undisclosed income, the assessee was left with ₹ 29.45 lakhs as cash and other advances etc. We find that the Revenue could not controvert single item of source and application as shown in this chart filed by the assessee. In these facts and circumstances of the case, we find that where on one hand the CIT(A) has rightly confirmed the case of the Revenue that the assessee had given loan/advances of ₹ 50 lakhs for short time, just before the date of search, out of its undisclosed income available as cash, and likewise, in our considered view, the CIT(A) was justified in holding that the assessee should be given telescoping benefit on this amount against the availability of cash, and since the cash was available to the extent of ₹ 29.45 lakhs, the CIT(A) has rightly accepted the assessee s explanation to the extent of ₹ 29.45 lakhs and the addition made by the AO was restricted to ₹ 20.55 lakhs. We find that the CIT(A) has passed a well reasoned speaking order on this issue, and accordingly, there being no mistake in the order of the CIT(A) on this issue, the same is confirmed - Decided against revenue

Summary

Issues involved:
1. Appeal of the Revenue against the order of the CIT(A) regarding the addition of Rs. 50 lakhs on account of a promissory note.
2. Appeal of the assessee for the block period ending 30-6-1998 against the order of the CIT(A).
3. Confirmation of the CIT(A) regarding the addition of Rs. 20.55 lakhs out of the Rs. 50 lakhs added by the AO.
4. Dismissal of the CO of the assessee's only ground by the learned counsel.

Analysis:

Issue 1: Appeal of the Revenue
The Revenue appealed against the CIT(A)'s decision to accept the assessee's explanation for the promissory note amount. The CIT-DR argued that the assessee failed to prove the identity of the promissory note's executant and the transaction's genuineness. The CIT-DR emphasized the need for the assessee to establish these aspects since the promissory note was found at the assessee's premises during a search. The counsel for the assessee countered this by presenting a statement from Shri Nishidh Desai, indicating that the loan was returned due to a failed land deal. The assessee also provided a detailed chart showing the source and application of undisclosed income, justifying the allowance of Rs. 29.45 lakhs out of the total Rs. 50 lakhs. The Tribunal found the son of the promissory note's executant's statement credible, along with the assessee's detailed financial chart. Consequently, the Tribunal upheld the CIT(A)'s decision to restrict the addition to Rs. 20.55 lakhs, considering the available cash and advances.

Issue 2: Appeal of the Assessee
The CO of the assessee raised a ground related to the seized paper at page 15 of Annexure A-98 and the addition of Rs. 20.55 lakhs out of the total Rs. 50 lakhs by the AO. However, the counsel for the assessee chose not to pursue this ground, leading to its dismissal.

Conclusion
The Tribunal confirmed the CIT(A)'s decision to allow Rs. 29.45 lakhs out of the Rs. 50 lakhs addition, based on the credible statement and financial evidence provided by the assessee. The Tribunal dismissed both the Revenue's appeal and the CO of the assessee, upholding the CIT(A)'s order.