2014 (4) TMI 773 - AT - Income Tax

Addition of unexplained investment Held that - Both the authorities have considered the issue without examining the facts - as seen from the record also, assessee took credit for the gift amount of Rs. 2 lakhs from the father which was confirmed whereas, on the basis of the amount mentioned in the Balance Sheet, A.O. brought to tax an amount of Rs. 3.6 lakhs - even the chit amounts and other amounts received are not examined properly - Both Revenue and assessee are aggrieved on the various confirmations/ deletions by the CIT(A) - thus, the matter is remitted back to the AO for fresh examination Decided in favour of Assessee. Disallowance of expenditure claimed Held that - CIT(A) partly confirmed the amount there is no reason to differ from the disallowance made by the CIT(A) AO has no basis to disallow the entire expenditure out of the commission earned the order of the CIT(A) upheld Decided against Revenue.

Summary

Issues:
1. Addition of unexplained investment made by the assessee.
2. Disallowance of expenditure claimed by the assessee.

Analysis:

Issue 1: Addition of Unexplained Investment
The judgment revolves around the addition of unexplained investment made by the assessee in the purchase of immovable property. The Assessing Officer (A.O.) disallowed various amounts claimed to be received as gifts and loans by the assessee, resulting in a total addition of Rs. 23,15,887. The CIT(A) partially granted relief to the assessee on loans received but confirmed other additions. However, the Tribunal found discrepancies in the A.O.'s approach, noting that the A.O. did not properly examine the facts. The Tribunal observed that the A.O. wrongly considered an affidavit filed by the assessee and made additions exceeding the claimed amounts. As a result, the Tribunal restored the issue to the A.O. for a fresh examination of the actual investment and funding sources, emphasizing the need to provide the assessee with an opportunity to substantiate the property investment.

Issue 2: Disallowance of Expenditure
The second issue pertains to the disallowance of certain expenditures claimed by the assessee as an agent of a Chit Fund Company. The A.O. disallowed the entire amount of Rs. 5,93,829 without providing an opportunity to the assessee. The CIT(A) partially confirmed the disallowance, reducing it to Rs. 1,50,000. The Tribunal upheld the CIT(A)'s decision, stating that the A.O. lacked a valid basis to disallow the entire expenditure. Considering the receipts and claimed expenditure, the Tribunal found the confirmed disallowance reasonable and declined to interfere with the CIT(A)'s order.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes and partly allowed the Revenue's appeal for statistical purposes. The judgment emphasizes the importance of proper examination of facts and providing opportunities to the assessee to substantiate claims, ensuring a fair assessment process.