2016 (2) TMI 1031 - AT - Income Tax

Unexplained investment - purchase of agricultural land - Held that - Mere payment by account payee cheques is not sacrosanct nor can it make non-genuine transaction as genuine. In view of the above, we confirm the addition of ₹ 7,55,000. We may also observe here that the assessee has furnished a list of unsecured loans referred to above, totalling to ₹ 18,80,000. However, the assessee claimed that he had received unsecured loans of ₹ 19 lakhs. Thus, there is a difference of ₹ 20,000 (Rs.19,00,000 - ₹ 18,80,000) for which no explanation has been given. Accordingly, the total addition comes to ₹ 7,75,000 (Rs. 7,55,000 ₹ 20,000). Accordingly, we confirm the addition to the above extent. The action of the Commissioner of Income-tax (Appeals) cannot be held correct, particularly when he has not brought any material on record to disprove the explanation of the assessee. It is observed that the assessee had furnished details of properties which he had sold during the earlier years. In case of doubt, the Revenue authorities should have verified the contention of the assessee. In fact, no such exercise has been done. As regards the past savings of the assessee also, the authorities below have rejected the contention of the assessee without assigning any cogent reasons. Shri Gurbachan Singh had been doing pheri business for the past many years and he was also having agricultural income. There is no evidence on record to controvert the explanation of the assessee that he was the owner of agricultural land and he had also produced the Jamabandi for the year 1985 in support of his claim. It is also seen that for the year under consideration, the assessee had declared an agricultural income of ₹ 15,000 which has been accepted by the Revenue authorities. In our opinion, the Revenue authorities were not justified in rejecting the assessee s explanation on the basis of surmises and conjectures. Accordingly, we hold that the assessee had invested a sum of ₹ 8,53,150 out of his past savings and out of sale of properties mentioned hereinabove. In view of the above, we confirm the addition of ₹ 7,75,000 and allow a relief of ₹ 19,78,150 (Rs. 11,25,000 ₹ 8,53,150) to the assessee.

Issues Involved:
1. Addition of Rs. 27,53,150 to the returned income.
2. Credibility of the sources of Rs. 8,53,150 from self-savings and Rs. 19 lakhs from unsecured loans.
3. Consideration of past savings and agricultural income.
4. Verification of loans from friends and relatives.
5. Validity of the addition based on the assessee's statement during the survey.

Detailed Analysis:

1. Addition of Rs. 27,53,150 to the Returned Income:
The assessee contested the addition of Rs. 27,53,150 made by the Assessing Officer (AO) to the returned income. The AO had added this amount as undisclosed income based on the investment in agricultural land, which was found during a survey under section 133A of the Income-tax Act, 1961.

2. Credibility of the Sources of Rs. 8,53,150 from Self-Savings and Rs. 19 Lakhs from Unsecured Loans:
The assessee claimed that Rs. 8,53,150 was from self-savings and Rs. 19 lakhs from unsecured loans. The AO and Commissioner of Income-tax (Appeals) did not accept this explanation. The AO noted that the loans were interest-free, not returned, and cash was deposited in creditors' bank accounts shortly before issuing cheques to the assessee. The Tribunal reviewed the affidavits and statements of creditors, along with bank records, and concluded that the assessee failed to prove the creditworthiness and genuineness of certain transactions.

3. Consideration of Past Savings and Agricultural Income:
The assessee argued that he had past savings from his business and agricultural income, which were not considered by the Commissioner of Income-tax (Appeals). The Tribunal found that the assessee had provided evidence of agricultural income and past savings, including a Jamabandi for 1985 and sale of properties. The Tribunal held that the Commissioner of Income-tax (Appeals) rejected the explanation without sufficient reason and accepted the assessee's claim of Rs. 8,53,150 from past savings and property sales.

4. Verification of Loans from Friends and Relatives:
The Tribunal noted that the AO had recorded statements from 13 creditors, who confirmed giving loans to the assessee. However, the AO doubted the genuineness of some transactions due to cash deposits before issuing cheques. The Tribunal evaluated the evidence and found that the assessee could not prove the creditworthiness and genuineness of loans amounting to Rs. 7,75,000. The Tribunal confirmed the addition of Rs. 7,75,000 but allowed relief for the remaining Rs. 11,25,000, as the creditors had provided satisfactory explanations.

5. Validity of the Addition Based on the Assessee's Statement During the Survey:
The Tribunal referred to the case of CIT v. S. Khader Khan Son, where it was held that statements recorded under section 133A during a survey have no evidentiary value. The Tribunal observed that the assessee's statement was made under apprehension and without corroborative evidence, thus, it could not be the sole basis for the addition. The Tribunal emphasized that retraction is permissible if the statement is shown to be contrary to the real facts, supported by evidence.

Conclusion:
The Tribunal concluded that the addition of Rs. 27,53,150 was not entirely justified. It confirmed the addition of Rs. 7,75,000 due to lack of evidence for certain loans but allowed relief of Rs. 19,78,150 (Rs. 11,25,000 from verified loans and Rs. 8,53,150 from past savings and property sales). The appeal was partly allowed, and the order was pronounced on February 25, 2016.

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