2013 (2) TMI 176 - HC - Income Tax

Addition on undisclosed income - Treating the advance as unexplained entry Whether CIT(A) and ITAT was right in deleting the addition made by AO - During the assessment proceedings, it was found that the assessee had shown liability towards an advance consideration received on account of sale of a commercial plot Held that - The assessee produced a copy of the agreement to sell and the purchaser s statement in which he stated that an advance was given to the assessee - Concluded that the amount which was shown in the balance-sheet as advance was not the undisclosed income - Decided against the Revenue. Addition by AO of an amount which represented repayment of amount out of undisclosed resources - Whether CIT(A) and ITAT was right in deleting the addition made by AO Held that - Amount was re-paid out of the amount received as advance from one of the purchaser (in above para) of commercial plot - Also assessee received a cheque, from the person to whom amount repaid, in lieu of amount repaid - Concluded that repayment was made not from the undisclosed resources - Decided against the Revenue.

Summary

Issues:
1. Addition of Rs.3,25,000 by the Income-tax Appellate Tribunal.
2. Deletion of Rs.1 lakh representing repayment from undisclosed sources.

Analysis:

Issue 1: Addition of Rs.3,25,000
The appeal was filed by the Revenue against the Tribunal's order deleting the addition of Rs.3,25,000 made by the Assessing Officer. The assessee had shown this amount as liability towards a commercial plot sale. The Tribunal found that the amount was an advance received from Shri Ajit Singh for the plot purchase. Shri Ajit Singh confirmed making the payment and was deemed a person of means. The Tribunal concluded that the amount shown in the balance-sheet was not the assessee's undisclosed income. The High Court upheld the Tribunal's findings, stating no perversity was found, and no interference was warranted.

Issue 2: Deletion of Rs.1 lakh
The second issue revolved around the deletion of Rs.1 lakh addition by the Commissioner of Income-tax (Appeals) and the Tribunal. The Assessing Officer added this amount due to a cheque received by the assessee from Shri Megh Chand Sharma not reflected as a liability. However, the explanation provided was that the cash payment to Shri Megh Chand Sharma was from the advance received from Shri Ajit Singh. The Tribunal accepted this explanation, noting that the addition was based on presumptions and conjectures. The High Court agreed with the Tribunal's decision, stating that the explanation given by the assessee was not rebutted by the Assessing Officer. The findings were upheld, and the appeal by the Revenue was dismissed.

In conclusion, both issues were decided against the Revenue, and the appeal was consequently dismissed by the High Court.