2012 (8) TMI 1036 - AT - Income Tax

Assessment u/s 153A - Addition of car and vehicle expenses - assessment of rental income - deemed rental value of the residential house at Islampura near Rajpura - addition made on account of low household withdrawals - disallowance of discount - unexplained share application money - difference in accounts of M/s Videocon Appliances and M/s Videocon International Ltd - addition made on account of salary to technical persons for which no justification was filed - addition made on account of unexplained loan received from Shri Vipan Kumar (HUF) is not justified.

Summary

Issues Involved:
1. Application of Section 153C and framing of assessment under Section 153A.
2. Restriction of addition on car and vehicle expenses.
3. Deemed rental value of shop at Railway Road, Rajpura.
4. Deemed rental value of residential house at Islampura, near Rajpura.
5. Deemed rental value of shop at Main Bazar, Mohinder Ganj, Rajpura.
6. Deemed rental value of house at Ambala.
7. Higher side of deemed rental value assessed by the Assessing Officer.
8. Addition on account of low household withdrawals.
9. Addition on account of disallowance of discount given to M/s Verma Electronics (P) Ltd.
10. Deletion of addition on account of unexplained share application money.
11. Deletion of addition on account of unexplained investment.
12. Deletion of addition on account of differences in accounts with M/s Videocon Appliances and M/s Videocon International Ltd.
13. Deletion of addition on account of salary to technical persons.
14. Deletion of addition on account of unexplained loan received from Vipan Kumar (HUF).

Detailed Analysis:

1. Application of Section 153C and Framing of Assessment under Section 153A:
The appellant contended that the CIT(A) erred in confirming the application of Section 153C and framing the assessment under Section 153A. The CIT(A) upheld the AO's findings, stating that the provisions of Section 153A automatically apply once a search warrant is executed, leading to the reopening of six preceding assessment years. The Tribunal dismissed this ground of appeal, agreeing with the CIT(A) that the AO acted in consonance with the provisions of Section 153A.

2. Restriction of Addition on Car and Vehicle Expenses:
The appellant argued that the CIT(A) erred in restricting the addition of Rs. 11,500/- of 1/5th of car and vehicle expenses against the AO's addition of Rs. 14,090/- of 1/4th of car and telephone expenses. The Tribunal found that the addition was made on an estimate basis without credible evidence. It was deemed reasonable to restrict the addition to 1/10th. Thus, this ground of appeal was partly allowed.

3. Deemed Rental Value of Shop at Railway Road, Rajpura:
The appellant contended that the CIT(A) erred in holding a deemed rental value of Rs. 36,000/- per month for the shop used as a godown. The Tribunal found that rental income cannot be assessed under "Income from house property" if the premises are used for business purposes. Therefore, this ground was allowed.

4. Deemed Rental Value of Residential House at Islampura, Near Rajpura:
The appellant argued that the CIT(A) erred in upholding the deemed rental value of a dilapidated residential house. The Tribunal agreed that rental income cannot be assessed for a house unfit for living, and thus, this ground was allowed.

5. Deemed Rental Value of Shop at Main Bazar, Mohinder Ganj, Rajpura:
The appellant argued that the CIT(A) erred in upholding the deemed rental value of a shop used as a workshop. The Tribunal found that the CIT(A) did not have sufficient evidence to ignore the appellant's claim of business use. Thus, this ground was allowed.

6. Deemed Rental Value of House at Ambala:
The Tribunal found that the house was not in a condition to be used for human habitation, similar to the residential house at Islampura. Thus, this ground was allowed.

7. Higher Side of Deemed Rental Value Assessed by the Assessing Officer:
This ground was general in nature and did not require separate adjudication.

8. Addition on Account of Low Household Withdrawals:
The Tribunal found no merit in the AO's estimation of household expenses without prima-facie material. Thus, this ground was allowed.

9. Addition on Account of Disallowance of Discount Given to M/s Verma Electronics (P) Ltd.:
The appellant contended that the CIT(A) erred in confirming the addition of Rs. 6,18,383/- for disallowance of discount. The Tribunal upheld the CIT(A)'s findings, agreeing that the high discount given to a sister concern was not justified. Thus, this ground was dismissed.

10. Deletion of Addition on Account of Unexplained Share Application Money:
The revenue contended that the CIT(A) erred in deleting the addition of Rs. 7,50,000/- as unexplained share application money. The Tribunal upheld the CIT(A)'s findings that the amount was contributed by the appellant's sister and the appellant, with requisite evidence filed. Thus, this ground was dismissed.

11. Deletion of Addition on Account of Unexplained Investment:
The CIT(A) found that the appellant had provided necessary proof for the investment of Rs. 1,90,000/-. The Tribunal upheld these findings, dismissing the revenue's ground.

12. Deletion of Addition on Account of Differences in Accounts with M/s Videocon Appliances and M/s Videocon International Ltd.:
The CIT(A) deleted the addition after the appellant provided a reconciliation statement. The Tribunal found no infirmity in the CIT(A)'s findings and dismissed this ground.

13. Deletion of Addition on Account of Salary to Technical Persons:
The appellant justified the salary to technical persons with requisite details. The Tribunal upheld the CIT(A)'s findings that the AO's addition was not justified, dismissing this ground.

14. Deletion of Addition on Account of Unexplained Loan Received from Vipan Kumar (HUF):
The CIT(A) found that the appellant had duly discharged the onus under Section 68 of the Act. The Tribunal upheld these findings, dismissing this ground.

Conclusion:
The appeal of the assessee was partly allowed, and the appeal of the revenue was dismissed. The Tribunal upheld the CIT(A)'s findings on most grounds, providing relief to the assessee on several issues.