2012 (9) TMI 836 - AT - Income Tax

Addition on account of alleged excess cash as per cash flow statement, alleged bogus advance liability, unsecured loans, unexplained investment and dis-allowance of long term capital loss - Held that - It is found that initially the case was built by AO on the basis of statement of affairs filed by assessee on the basis of which AO prepared cash flow statement and added back the shortage of cash as his income. Similarly on this basis only the AO had added back amount claimed as advance from Tawri Colonizers. Instead during investigations u/s 133(6) M/s Tawri Colonizers had claimed to carry liability. These amounts were also added by AO. These additions were deleted/reduced by CIT(A) on the basis that these represented amounts received from M/s Tawri Colonizers being part of sale consideration. If that be the case then these should have been shown as credits in the statement of affairs of assessee for calculation of short cash in hand and consequent addition should have been upheld by CIT(A). Similarly, calculation of long term capital gain has been done on the basis of rate adopted u/s 50C whereas from the facts of the case it emerges that assessee along with his brothers had sold whole land to the company, then how assessee had shown in his return a single piece of land measuring 100.64 sq. yds. The findings of AO and CIT(A) are contradictory in nature. Therefore, we are of the view that the whole issue should be examined by AO afresh -Appeals filed by the assessee as well as by revenue are allowed for statistical purposes.

Issues Involved:
1. Addition on account of alleged excess cash.
2. Long term capital loss and capital gain assessment.
3. Addition of advance received from M/s Tawari Colonizers Pvt. Ltd.
4. Addition towards unsecured loans given to M/s Tawari Colonizers Pvt. Ltd.
5. Addition for unexplained investment.
6. Overlapping and double assessment.
7. Levy of interest under sections 234A, 234B, and 234C.
8. Deletion of addition by CIT(A) on account of excess cash.
9. Deletion of addition by CIT(A) on account of bogus advance liability.
10. Reduction of addition by CIT(A) on account of liability shown by M/s Tawari Colonizers Pvt. Ltd.

Detailed Analysis:

1. Addition on Account of Alleged Excess Cash:
The assessee contested the addition of Rs. 1,05,000/- as excess cash, arguing that there was no excess cash expenditure incurred. The CIT(A) partially agreed, deleting Rs. 2,94,218/- out of the total Rs. 3,99,218/- added by the Assessing Officer (AO), but upheld the addition of Rs. 1,05,000/- as the assessee failed to explain this amount satisfactorily.

2. Long Term Capital Loss and Capital Gain Assessment:
The AO calculated long term capital gain of Rs. 1,97,267/- based on the sale of land, rejecting the assessee's claim of a long term capital loss of Rs. 7,850/-. The AO applied section 50C, which the assessee argued was not applicable as the land was sold in 1998. The CIT(A) upheld the AO's calculation, noting discrepancies in the assessee's documentation and the lack of evidence supporting the claimed sale in 1998.

3. Addition of Advance Received from M/s Tawari Colonizers Pvt. Ltd.:
The AO added Rs. 5,96,536/- as bogus advance liability, which the CIT(A) deleted. The CIT(A) accepted the assessee's reconstructed cash flow statement and noted that the AO did not confront the assessee with the discrepancies during the assessment proceedings.

4. Addition Towards Unsecured Loans Given to M/s Tawari Colonizers Pvt. Ltd.:
The AO added Rs. 6,19,500/- as unsecured loans, which the CIT(A) reduced to Rs. 2,42,000/-. The CIT(A) found that the amounts were part of sale consideration and should have been shown as credits in the statement of affairs.

5. Addition for Unexplained Investment:
The AO added Rs. 2,42,000/- for unexplained investment, which the CIT(A) upheld. The assessee failed to provide satisfactory evidence to explain this amount.

6. Overlapping and Double Assessment:
The assessee argued that various additions overlapped, resulting in double assessment. However, this issue was not specifically addressed in the judgment.

7. Levy of Interest Under Sections 234A, 234B, and 234C:
The assessee contested the levy of interest, arguing it was illegal and excessive. This issue was not specifically addressed in the judgment.

8. Deletion of Addition by CIT(A) on Account of Excess Cash:
The revenue argued that the CIT(A) erred in deleting the addition of Rs. 3,99,218/- for excess cash. The CIT(A) found that the AO did not confront the assessee with the discrepancies and accepted the assessee's reconstructed cash flow statement, except for Rs. 1,05,000/-.

9. Deletion of Addition by CIT(A) on Account of Bogus Advance Liability:
The revenue argued that the CIT(A) erred in deleting the addition of Rs. 5,96,536/-. The CIT(A) found that the AO did not provide the assessee an opportunity to explain the discrepancies and accepted the assessee's explanation.

10. Reduction of Addition by CIT(A) on Account of Liability Shown by M/s Tawari Colonizers Pvt. Ltd.:
The revenue contested the reduction of the addition from Rs. 12,04,523/- to Rs. 2,42,000/-. The CIT(A) found that the amounts were part of the sale consideration and should have been shown as credits in the statement of affairs.

Conclusion:
The Tribunal found that the findings of the AO and CIT(A) were contradictory and remanded the case back to the AO for fresh examination, considering all relevant information and giving the assessee a proper opportunity to be heard. Both the assessee's and revenue's appeals were allowed for statistical purposes. The Tribunal emphasized the need for a thorough and fair reassessment of the issues involved.

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