2013 (10) TMI 777 - AT - Income Tax

Addition u/s 68 of the Income Tax Act Held that - Cost of vehicles bearing Regn. No. GJ-21T-9565 and GJ-21-T-953, which were sold during the year have been properly recorded in the books of the appellant in the year of its purchase and has been reflected in the books of accounts as well as computation of WDV in depreciation working as well as computation of income. Based on the factual matrix and evidences on record it can be inferred that typographical error made by the accountant can in no way be starched to imagine and hold that unexplained investment in vehicles has been made by the appellant. In order to charge unexplained investment as income, the burden is upon the Revenue to conclusively establish by evidence or material the fact of investment and in the instant case no such investment has been established by the AO. Section 69 does not empower the AO to assess the income merely on the basis of suspicion. Allowance for expenditure made for improvement in vehicle of Rs. 373080/- - Held that - On verification of the depreciation chart attached with the return of income, it is revealed that the assessee has firstly added the capital expenditure in the written down value of the vehicles and then she deducted the sale consideration form it. In this way, it is absolutely clear that the assessee has decreased the value of capital gain. Further it is pertinent to mention here that the assessee has failed to produce any documentary proofs in regard of capital expenditure made towards the vehicles. In the absence of any documentary evidence, how can it is justified that the assessee has made capital expense Decided against the Assessee.

Summary

Issues involved:
1. Addition of Rs. 10,25,000 under section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 10,25,000 made under section 68.
3. Addition of Rs. 10,00,000 under section 69B of the Income Tax Act.
4. Deletion of addition of Rs. 10,00,000 made under section 69B.
5. Disallowance of capital expenditure of Rs. 3,73,080 for computing short-term capital gain.

Analysis:

Issue 1: Addition of Rs. 10,25,000 under section 68 of the Income Tax Act:
The Assessing Officer (AO) added Rs. 10,25,000 under section 68 as unexplained cash deposited in the bank account of the assessee. The AO disbelieved the explanation provided by the assessee regarding the source of the cash deposit. However, the Commissioner of Income Tax (Appeals) (CIT(A)) deleted this addition after considering the evidence submitted by the assessee, including confirmations from buyers and other supporting documents. The ITAT upheld the CIT(A)'s decision, stating that the assessee had discharged the onus of explaining the source of the cash deposits.

Issue 2: Deletion of addition of Rs. 10,25,000 made under section 68:
The CIT(A) deleted the addition made under section 68 by the AO, as the assessee provided sufficient evidence to explain the source of the cash deposits. The ITAT upheld this decision, emphasizing that the AO did not bring any material to contradict the assessee's explanation, and thus, the addition was not justified.

Issue 3: Addition of Rs. 10,00,000 under section 69B of the Income Tax Act:
The AO made an addition of Rs. 10,00,000 under section 69B for unaccounted investment in two vehicles sold by the assessee. The AO raised concerns about discrepancies in the registration details of the vehicles and the ownership status as per the assessee's submissions. However, the CIT(A) deleted this addition, noting that the vehicles were purchased in preceding years and properly recorded in the books of accounts. The ITAT upheld the CIT(A)'s decision, stating that no unexplained investment was proven by the Revenue.

Issue 4: Deletion of addition of Rs. 10,00,000 made under section 69B:
The ITAT upheld the CIT(A)'s decision to delete the addition made under section 69B, as the vehicles in question were purchased in previous years and properly accounted for in the books of accounts. The ITAT emphasized that the burden of proof was on the Revenue to establish unexplained investments, which was not done in this case.

Issue 5: Disallowance of capital expenditure for computing short-term capital gain:
The AO disallowed capital expenditure of Rs. 3,73,080 claimed by the assessee for improvements in vehicles while computing short-term capital gain. The CIT(A) upheld this disallowance, stating that the expenses were capital in nature and could not be considered as allowable expenditure for the relevant assessment year. The ITAT dismissed the assessee's appeal on this ground as the assessee did not appear for the hearing.

In conclusion, both the revenue's appeal and the assessee's cross-appeal were dismissed, with the ITAT upholding the decisions of the CIT(A) in deleting the additions made by the AO and confirming the disallowance of capital expenditure for computing short-term capital gain.