2014 (2) TMI 1031 - AT - Income Tax

Order of CIT(A) - Proper examination not done CIT(A) deleted various additions as opening Capital Balance, Gift from parents & sister, outstanding expenses, unsecured loans, disallowance of expenses and agricultural Income returned - Revenue objected for deleting various additions by CIT(A) without evidence or giving opportunity to the A.O - The matters raised before require re-examination by AO - As seen from the balance sheet placed on record, there are no immovable properties, even the so-called agricultural land purchased in 2005 - As stated by AO no books of accounts or vouchers are furnished - The confirmation of gift letters signed and filed also are devoid of any information about date of gift, mode of gift and amount advanced by each person - Opening capital claimed also require confirmation about sources - CIT(A) without examining this issue, deleted them without proper reasons - Whether assessee has any other Balance Sheet reflecting assets is also not on record - Rule 46A violation is also there thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Revenue.

Summary

Issues Involved:
1. Addition of opening capital balance
2. Addition of gifts amount
3. Addition of outstanding expenses under section 43B
4. Addition of unsecured loans
5. Disallowance of expenses at an estimated rate
6. Treatment of agricultural income

Analysis:

1. Addition of Opening Capital Balance:
The Revenue appealed against the CIT(A)'s order deleting the addition of Rs.7,89,800 as opening capital balance. The CIT(A) held that the addition cannot be sustained as there were no cogent reasons given for the addition. The CIT(A) directed the AO to delete the same, emphasizing that the opening balance is an accumulation over the years and should not be considered for addition in the year under consideration. The CIT(A) found the AO's decision unjustified due to lack of proper reasons, and therefore, ruled in favor of the assessee.

2. Addition of Gifts Amount:
The Revenue contested the deletion of the addition of Rs.1,35,000 as gifts from parents and sister. The CIT(A) held that the onus lies on the appellant to prove the gifts, and when confirmation letters are submitted, the onus is discharged. The CIT(A) emphasized that the Revenue must provide cogent material to prove the gifts wrong, which was lacking in this case. Therefore, the CIT(A) directed the AO to delete the addition as it was made without valid reasons.

3. Addition of Outstanding Expenses under Section 43B:
The CIT(A) confirmed the addition of outstanding expenses amounting to Rs.70,100 under section 43B. The appellant's submission that these expenses did not fall under the provisions of section 43B was rejected by the CIT(A), who found the addition warranted. The CIT(A) directed the AO to delete the addition of Rs.70,100 as it was made under an unwarranted application of section 43B.

4. Addition of Unsecured Loans:
The CIT(A) confirmed the addition of Rs.96,000 as unsecured loans, as the appellant did not press this issue during the appellate proceedings. The CIT(A) found that the confirmation letter from the unsecured loan creditor was obtained and submitted after the assessment proceedings, leading to the confirmation of this addition.

5. Disallowance of Expenses at an Estimated Rate:
The CIT(A) deleted the addition of expenses estimated at 10% and restricted the disallowance to 5%. The CIT(A) noted that the self-made vouchers lacked authenticity, making the expenses susceptible to manipulation. Therefore, the CIT(A) directed the AO to restrict the disallowance to 5% for the ends of justice to be met.

6. Treatment of Agricultural Income:
The CIT(A) deleted the addition of Rs.35,000 towards agricultural income, stating that the AO did not provide any material or reasons for treating it as income from other sources. The CIT(A) emphasized that agricultural income is a yearly phenomenon and should not be interfered with without proper justification. The CIT(A) directed the AO not to make such an addition and accept the agricultural income as returned.

In conclusion, the ITAT Hyderabad allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s order and restoring the assessment to the AO for re-examination, emphasizing the need for a thorough assessment with proper evidence and opportunities given to the assessee.