2012 (8) TMI 1069 - AT - Income Tax

Summary

Issues involved: Whether the deletion of addition of undisclosed income by the Ld. CIT(A) is justified.

Issue 1: Addition of undisclosed income

The appeal pertains to the deletion of an addition of Rs. 16,67,250 as undisclosed income of the assessee. The Assessing Officer had initiated block assessment proceedings under section 158BD based on discrepancies in the purchase of land and advance payments not reflected in the computer print-out.

Details: The assessee, a society incorporated in 2001, purchased land for Rs. 23,22,600, but only Rs. 13,55,350 was reflected in the seized computer print-out. Additionally, an advance payment of Rs. 7,00,000 was not accounted for. The Assessing Officer considered the computer print-out as true books of account and added the difference as undisclosed income.

Issue 2: Justification for deletion

The Ld. CIT(A) deleted the addition after noting that the loans received from two individuals were utilized for land investments. These loans were reflected in the lenders' income tax returns and accepted by the Assessing Officer, indicating a legitimate source of funds for the assessee's transactions.

Details: The lenders, Shri K. Balachandran Nair and Shri K. Rajagopalan, had provided loans totaling Rs. 44,72,656, which were used by the assessee for land transactions. The Ld. CIT(A) found the investments fully explained and deleted the addition of undisclosed income.

Judgment Summary:

The ITAT Cochin upheld the Ld. CIT(A)'s order, dismissing the Revenue's appeal. The tribunal observed that the society had not engaged in any business activities before the search date, relying on loans for land transactions. The lenders' loans were duly reflected in their tax returns and accepted by the Assessing Officer, indicating a legitimate source of funds. The tribunal found no reason to doubt the regular books of accounts submitted by the assessee, concluding that the investments were adequately explained. Consequently, the addition of undisclosed income was deemed unjustified, and the Ld. CIT(A)'s decision was upheld.

Note: The judgment was pronounced on 10-08-2012 by B. R. Baskaran (Accountant Member) of the Appellate Tribunal ITAT Cochin.