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2014 (2) TMI 655 - AT - Income TaxAdditions u/s 41 - Forfeiture of advance due to cancellation of agreement - CIT(A) Deletion the additions - Held that - The CIT(A) and the AO in the remand report has relied upon a chart of stock-in-trade and the AO in the remand proceedings had made the assumptions that due to shortage of time, the evidence may not have been filed by the assessee and due to the shortage in the original assessment proceedings must have made assumption that the amount has not been returned but has been forfeited - The findings of the AO in the remand proceedings and consequently by the CIT(A) that the amount of Rs. 20 lacs have been returned and the additions have been deleted is perverse of the facts - if the amount has been returned the source of said Rs.20 lacs given as advance against the purchase of property at 749C GTB Nagar remains unexplained -The AO in the remand report as well as the CIT(A) has missed this aspect that ultimately there is shortage of Rs.20 lacs which has rightly been added to the income of the assessee by the AO - The CIT(A) is not justified in deleting the additions made by the AO thus, the order of the CIT(A) set aside Decided in favour of Revenue.
Issues:
Appeal against CIT(A) order for assessment year 2007-08 - Addition of Rs.20,00,000 - Cancellation of agreement - Forfeited advance - Source of income - Undisclosed income. Analysis: The Revenue appealed against the CIT(A) order for the assessment year 2007-08, challenging the deletion of an addition of Rs.20,00,000. The grounds of appeal included contentions that the CIT(A) erred in law and facts by deleting the addition without evidence of agreement cancellation or cash receipt upon agreement cancellation. The Revenue argued that the CIT(A) wrongly accepted the assessee's explanation without substantiating evidence, especially concerning a cancellation agreement executed after a significant lapse of time. Additionally, the Revenue contended that there was no evidence to show the amount received was still payable, thereby disregarding IT Act provisions. The AO's order highlighted that the assessee received income from business or profession, with specific focus on transactions related to property agreements. The AO found discrepancies in the documentation regarding cash payments and lack of evidence for the source of funds. The AO treated a certain amount as unexplained investment due to insufficient documentation. The AO also raised concerns about the forfeiture of an advance amount received by the assessee, leading to the addition of undisclosed income. The AO's decision was based on the presumption of forfeiture due to lack of evidence of amount return. During the appellate proceedings, the assessee presented arguments challenging the addition of Rs.20,00,000, emphasizing that the amount was returned, not forfeited. The AR's submissions highlighted the sequence of events and explained the utilization of the advance received. The CIT(A) reviewed the AO's basis for the addition, considering the arguments presented. The CIT(A) concluded that the amount was logically returned based on the sequence of transactions, refuting the AO's presumption of forfeiture. The CIT(A) directed the deletion of the addition based on the logical explanation provided by the assessee. The JCIT(DR) contested the CIT(A) and AO's decision, arguing that the forfeited amount was considered the source of income for another property transaction. The JCIT(DR) disagreed with the deletion of the addition, claiming that the source of funds for the subsequent property purchase remained unexplained. However, the CIT(A) and the remand report highlighted the logical explanation provided by the assessee regarding the return of the amount, leading to the deletion of the addition. In conclusion, the Revenue's appeal was allowed, reversing the CIT(A)'s decision and confirming the AO's order to add the amount to the assessee's income. The judgment emphasized the importance of substantiating transactions and documenting the source of funds to avoid discrepancies and additions to undisclosed income. Order pronounced in the open court on 14th February, 2014.
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