2016 (5) TMI 1381 - AT - Income Tax

Undisclosed income of the appellant - addition on the statement of the appellant recorded u/s 131 - Held that - In the present case, the appellant has not produced any material to show that the admission made by him and corroborated by the statement of Shankar lal Khandelwal were incorrect. Once there is a clear admission, voluntarily made, on the part of the appellant, that would constitute a good piece of evidence at the hands of the Revenue authorities. Further, once the appellant has admitted to the undisclosed income and surrendered the same, Revenue has refrained from enquiring any further into attendant circumstances. The theory of preponderance of probabilities as canvassed by the ld AR doesn t advance the case of the appellant in the facts of the present case. The statements recorded u/s 131 of the appellant and corroborated by the statement of Shri Shankar lal Khandelwal recorded u/s 132(4) of the Act are thus clearly relevant and admissible as evidence against the appellant. Thus we are of the considered view that the addition of undisclosed income has been rightly made and confirmed by ld CIT(A). The ground taken by the appellant is accordingly dismissed. Undisclosed investment u/s 69 - Held that - Section 69 of the Act provides that where the appellant has made an investment which is not recorded in the books of accounts, if any maintained by the appellant and the appellant offers no explanation about the nature and source of investment or explanation so offered by the appellant is not satisfactory in the opinion of the AO, the value of the investment so made shall be deemed to be income of the appellant for the said financial year. On reading of the relevant provisions, we find that there is nothing which suggest that where the source has been explained and there is some time gap between the receipt and the ultimate utilisation, that would call for disallowance under section 69 of the Act. All it provides is that the appellant has to provide an appropriate explanation regarding the nature and source of investment which has been duly provided by the appellant in the instant case. In light of the same, we delete the addition as undisclosed investment u/s 69 of the Act Treatment of agricultural income treated as income from other sources - Held that - Undisputedly, the appellant owns agricultural land situated in Fatehpur Tehsil Sikar District and he has consistently been declaring agriculture income of past couple of years. From the perusal of ld CIT(A) s order, it is noticed that the appellant has declared agriculture income ₹ 1,16,400/- during the year under consideration as against agricultural income of ₹ 1,10,500 in AY 2007-08 and ₹ 80,500 in AY 2006-07. There is thus no major variation of agricultural income that has been noticed vis-a-vis previous years which causes any suspicion in his mind that any other income has been shown in the garb of agriculture income. In view of the same following the past years where the agriculture income has been accepted by the Revenue, we delete the subject addition on account of agriculture income being treated as income from other sources. Appeal filed by the assessee is partly allowed.

Issues Involved:
1. Addition of ?56,50,000 as undisclosed income.
2. Addition of ?8,13,010 as unexplained investment under Section 69 of the IT Act, 1961.
3. Treatment of ?1,16,400 agricultural income as income from other sources.

Issue-wise Detailed Analysis:

1. Addition of ?56,50,000 as Undisclosed Income:
The core issue revolves around the addition of ?56,50,000 as undisclosed income based on statements recorded during search and seizure operations under Section 132 of the IT Act against an individual involved in a real estate project. The assessee's involvement and cash investment in the project were confirmed through statements made under Sections 131 and 132(4) of the Act. Despite the assessee later denying financial dealings and presenting an affidavit from the individual, the AO treated the amount as undisclosed income based on the initial statements and ledger accounts provided during the assessment proceedings.

The assessee argued that the CIT(A) erred by relying on oral evidence without considering the lack of documentary evidence and the improbability of such large cash transactions without proper documentation. The Tribunal, however, upheld the addition, emphasizing that the statements made under Sections 131 and 132(4) were significant pieces of evidence and that the retraction lacked credibility. The Tribunal cited the Supreme Court's stance that admissions are crucial evidence and can only be retracted if proven to be incorrect, which the assessee failed to do. Consequently, the addition of ?56,50,000 as undisclosed income was confirmed.

2. Addition of ?8,13,010 as Unexplained Investment under Section 69:
The dispute here concerns the addition of ?8,13,010 as unexplained investment for a property purchase. The assessee claimed that ?6,40,000 of this amount was a gift from his brother, which was deposited and later withdrawn from his bank account. The CIT(A) doubted the availability of this cash for 16 months until the property purchase and thus treated it as unexplained investment.

The Tribunal noted that the receipt of the gift and subsequent withdrawal were undisputed. The conveyance deed indicated that the payment was made at the time of execution, not earlier. The Tribunal found it improbable that the entire purchase consideration was paid in advance without documentation. However, it emphasized that Section 69 does not require disallowance solely based on a time gap between receipt and utilization if the source is explained. Thus, the Tribunal deleted the addition of ?8,13,010, accepting the assessee's explanation.

3. Treatment of ?1,16,400 Agricultural Income as Income from Other Sources:
The issue here was the treatment of ?1,16,400 declared as agricultural income, which the CIT(A) reclassified as income from other sources. The assessee consistently declared agricultural income in previous years, with no significant variations that would raise suspicion.

The Tribunal observed that the agricultural income declared in the current year was consistent with previous years. Given the lack of significant variation and the acceptance of agricultural income in past years, the Tribunal deleted the addition, treating the income as agricultural as claimed by the assessee.

Conclusion:
The appeal was partly allowed. The addition of ?56,50,000 as undisclosed income was upheld, while the additions of ?8,13,010 as unexplained investment and ?1,16,400 as income from other sources were deleted. The Tribunal emphasized the importance of credible evidence and consistency in declaring agricultural income.

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