2012 (12) TMI 247 - AT - Income Tax

Addition on account of gift from the assessee s mother Held that - Computerized books of account of the donor and the donee have not been rejected by the AO - AO had not brought any clinching documentary evidence on record to repudiate the assessee s claim - Revenue had failed to bring any corroborate documentary evidence to pin down the assessee and that the addition has been resorted to only on surmise and conjecture in a flimsy way. On a perusal of the cash book of the donor, it has been observed that at that relevant point of time, the donor had sufficient cash balance at her kitty to gift a sum of Rs.2.01 lakh leaving a balance of Rs.84,790/- on hand as on 31.8.1999 - genuineness of the gift by the donor and receipt of the same by the assessee cannot be disbelieved - addition deleted Addition on account of investment in Ninad Co-op Housing Society - alleged that the assessee made an investment of Rs.20 lakhs in Flat Nos.202, 203, 302 & 402 in Ninand Co-op Hsg. Society in the name of his four employees as conduits Held that - No conclusive documentary evidence to lead that the assessee had invested Rs.20 lakhs in Nanad Co-op Housing society by using his four employees as conduits for booking of flats - authorities below have not brought any conclusive documentary evidence on record that the assessee had, in fact, made unaccounted investment of Rs.20 lakhs and, accordingly, the addition of Rs.20 lakhs stands deleted. Addition on account of unaccounted investment - alleged that the assessee accepted the fact that Rs.4.5 lakhs in cash and Rs.50,000/- in cheque have been paid and receipts obtained for purchase of this property which has not, however, been reflected in the books of the account and the same is offering now for taxation Held that - This agreement was, in fact, entered into in the month of March 1995 whereas the block period was from 1.4.1996 to 6.9.2001 - this transaction alleged to have been entered into by the assessee doesn t fall within the block period under consideration - in favour of the assessee Addition on account of unaccounted sum given to Shri Sanjeev Shukla - alleged that the assessee s mother filed a civil suit against Neelkant Corporation involving Rs.1.5 lakhs against which documents showed that shops were allotted to the assessee s mother and also relied on the statement of Sanjeev Shukla Held that - Agreement of understanding purported to have been entered into between the assessee s mother and Shri Sanjeev shukla - suit has been filed by the asssessee s mother in a Civil Court against Neelkant Corporation involving Rs.1.5 lakhs against which documents show that plot No.7 and two shops were allotted to assessee s mother - assessee s mother had invested the said sum with Neelkant Corporation for allotment of a plot and two shops - against the assessee. Addition on account of unaccounted investment loan to Shri Dinesh Dhabalia Held that - No loan of Rs.5 lakhs was given to Shri Dhabalia as alleged by the AO and that the suit was filed by Dhabalia only on the basis of assessee s refusal to return the flat and documents to him etc. - assessee has not been extended an opportunity to cross examine Dhabalia for his statement purported to have been recorded which was solely relied on by the AO - Revenue has failed in its endeavour to bring on record any unambiguous documentary proof to nail the assessee on this score - addition delete Additions on account of unaccounted investments in Jay Shiva Apartments Held that - Addition is made based on the general practice of cash payments made outside the books of accounts in the case of immovable property transactions - In order to establish that the assessee had paid amount outside the books of accounts for effecting real estate transactions substantial evidence has to be placed on record which is absent in this case. It would be unjust if an addition is made on the appellant based on a statement made by one of the partners of the firm without further making enquiries and collecting evidence addition deleted Addition on account of unaccounted investment from Bhavya Ghantakaran Cottage Association Held that - AO s presumption that the assessee financed Shri Shash by giving him Rs.10 lakhs and in lieu of which he obtained post-dated cheques as security was without any basis or with no corroborate evidence. Admitting the AO s logic for argument sake, no prudent lender would have parted with such a huge sum without any substantial proof in the shape of a promissory note as proof - no addition can be resorted to purely based on presumption, assumption and guess work addition deleted Addition on account of unaccounted investment in Dhwirup Bungalow - AO had found that a Civil suit was pending in a Court where the assessee had claimed possession of a property from Shree Jaisheel A Patel against the payment of Rs.5 lakhs and another Rs.50,000/- given as registration charges Held that - Assessee was having sufficient cash balance with him and family members as per the books of accounts - assessee had produced documentary proof to belie the assumption of the AO who took a stand that the investment of these amounts were not open to verification etc. - investment made by the assessee stands explained addition deleted Addition on account of investment in Santro Car alleged that Car was not registered in the name of the assessee Held that - Assessee had produced the receipt for alleged to have paid cash of Rs.1 lakh and subsequent return of the vehicle which appeared to have been a used car and also found at the time of search operation, the addition of Rs.1,80,000/- cannot be sustained addition deleted Addition of Rs.3 lakhs being fictitious entries in the name of Bharat Textile Held that - There was no justification in making the addition since there was no question of any unaccounted investments and drafts have been purchased from the cash available as per cash book - since the drafts have been purchased from the cash available at the relevant period, there was no question of making any addition on this count. The addition of Rs.3 lakhs is, therefore, deleted. Addition of Rs.1,01,000/- treating the value of household items purchased as unaccounted and unexplained investment - assessee submitted that the AO had not appreciated the assessee s explanation on the ground that the books were not found during the search and entry showing all the purchases of household articles from time to time was not believable Held that - It is a common phenomenon for a person of appellant s stature to accumulate household appliances, entertainment equipments and other electronic items during a period of time either by way of purchase, gifts etc. Further, there is no evidence to establish that these goods are purchased out of unexplained source addition deleted

Summary

Issues Involved
1. Difference between opening and closing capital as undisclosed income.
2. Difference in capital account of Nanak Cutlery Mart.
3. Gift from the mother as undisclosed income.
4. Investment in Ninad Co-op. Housing Society.
5. Unaccounted investment with Shri Yogesh J Rawal.
6. Unaccounted sum given to Shri Sanjeev Shukla.
7. Unaccounted investment by way of cash loan to Shri Dinish Dhabalia.
8. Unaccounted investment in Jay Shiva Apartment.
9. Deposit with A.D. Patel & Co. for Jay Shiva Apartment.
10. Unaccounted investment in land from Bhavya Ghantakaran Cottage Association.
11. Unaccounted investment in Dhwirup Bungalow.
12. Rent from Dhwirup Bungalow property.
13. Unaccounted investment in Santro Car.
14. Fictitious entries in the name of Bharat Textiles.
15. Unaccounted investment in shares.
16. Unaccounted household items purchased.
17. Interest earned on loans advanced.
18. Opening capital as income.
19. Unexplained cash credits.
20. Unexplained stock in the business.

Detailed Analysis

I. IT (SS)A No.317/A/2004 - By Indrajitsingh Suri

1. Difference between opening and closing capital:
The AO noted a discrepancy between the opening and closing capital for AY 2000-01 and added Rs.3,46,189/- as undisclosed income. The CIT (A) sustained the addition but the Tribunal deleted both the additions of Rs.3,46,189/- and Rs.72,956/- based on jurisdictional High Court rulings.

2. Gift from the mother:
The AO added Rs.2.01 lakhs as undisclosed income, questioning the donor's cash balance. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting the genuineness of the gift deed and the cash balance in the donor's account.

3. Investment in Ninad Co-op. Housing Society:
The AO added Rs.20 lakhs based on statements and documents found during the search. The CIT (A) upheld the addition. The Tribunal deleted the addition, citing lack of conclusive evidence and denial of cross-examination of the key witness.

4. Unaccounted investment with Shri Yogesh J Rawal:
The AO added Rs.5 lakhs based on documents and statements. The CIT (A) sustained the addition. The Tribunal deleted the addition, noting that the transaction was beyond the block period.

5. Unaccounted sum given to Shri Sanjeev Shukla:
The AO added Rs.1.5 lakhs based on a civil suit and statements. The CIT (A) upheld the addition. The Tribunal sustained the addition, finding sufficient evidence of investment.

6. Unaccounted investment by way of cash loan to Shri Dinish Dhabalia:
The AO added Rs.5 lakhs based on a civil suit and statements. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting lack of cross-examination and documentary proof.

7. Unaccounted investment in Jay Shiva Apartment:
The AO added Rs.7.43 lakhs and Rs.2 lakhs based on statements and documents. The CIT (A) upheld the additions. The Tribunal deleted the additions, citing lack of substantial evidence.

8. Unaccounted investment in land from Bhavya Ghantakaran Cottage Association:
The AO added Rs.10 lakhs based on post-dated cheques and documents. The CIT (A) sustained the addition. The Tribunal deleted the addition, noting lack of corroborative evidence and reliance on assumptions.

9. Unaccounted investment in Dhwirup Bungalow:
The AO added Rs.5.51 lakhs based on a civil suit and statements. The CIT (A) upheld the addition. The Tribunal deleted the addition, finding sufficient documentary proof of the investment.

10. Rent from Dhwirup Bungalow property:
The AO added Rs.3.07 lakhs as rent and investment. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting lack of evidence of ownership and rental income.

11. Unaccounted investment in Santro Car:
The AO added Rs.1.8 lakhs based on the assessee's statement. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting the car was returned and the payment was accounted for.

12. Fictitious entries in the name of Bharat Textiles:
The AO added Rs.3 lakhs based on cash deposits and drafts. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting sufficient cash balances and documented transactions.

13. Unaccounted investment in shares:
The AO added Rs.1,17,900/- based on unexplained sources. The CIT (A) upheld the addition. The Tribunal sustained 65% of the addition, granting partial relief.

14. Unaccounted household items purchased:
The AO added Rs.1,01,000/- based on a list of items. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting lack of evidence of unexplained sources.

II. IT (SS)A No.331/A/2004 - By the Revenue

1. Interest earned on loans:
The Tribunal dismissed the Revenue's appeal on interest earned on loans advanced to Jitendra Gajjar, Yogish Raval, Sanjeev Shukla, and Jaysheel A Patel, as the principal amounts were deleted in the assessee's appeal.

III. IT (SS)A No.318/A/2004 - By Smt. Manjeetkaur I Suri

1. Opening capital as income:
The AO added Rs.8,98,847/- as undisclosed income. The CIT (A) upheld the addition. The Tribunal deleted the addition, noting the assessee's legitimate earnings and activities.

2. Difference between opening and closing capital:
The AO added Rs.5,23,221/- as undisclosed income. The CIT (A) directed verification. The Tribunal remitted the issue back to the AO for fresh consideration.

3. Unexplained cash credits:
The AO added Rs.3.35 lakhs as unexplained cash credits. The CIT (A) upheld the additions. The Tribunal deleted Rs.1 lakh (Sagar Consultants), Rs.40,000 (Princy I Suri), and Rs.1 lakh (Kamlaben Somani), but sustained Rs.95,000 (Anku Traders).

4. Unexplained stock in the business:
The AO considered the stock as unaccounted income. The CIT (A) sustained the addition. The Tribunal deleted the addition, noting the stock was accounted for in the books.

Final Order:
1. The assessee's appeal (IT(SS)A No.317/A/2004) is partly allowed.
2. The Revenue's appeal (IT(SS)A No.331/A/2004) is dismissed.
3. The assessee's appeal (IT(SS)A No.318/A/2004) is partly allowed for statistical purposes.