2014 (10) TMI 782 - AT - Income Tax

Addition of unexplained investment under various heads Held that - Had it been the case of admission of additional evidence by the CIT(A) without confronting to the AO, the Revenue should have taken a ground with regard to the violation of Rule 46A of the Income Tax Rules - from the details furnished, the assessee has given a certificate that the evidences were filed before the AO and the certificate was not disputed by the revenue - the details were available before the AO and before making addition in this regard, the material should have been examined by him - CIT(A) has carefully examined the details of investment from one scheme to the other and finally concluded that actual investment in TATA Assets Management was ₹ 10 lakhs and not ₹ 27,67,236/- as adopted by the AO the order of the CIT(A) is upheld. Source of investment Held that - The document was executed on a plain paper and it is a fake document, as it is not properly legible - It is important to note here that in Uttar Pradesh, agreement for sale of immovable property is required to be registered under the Indian Registration Act, of which Stamp Duty is required to be paid - only that property can be sold which is owned by the seller - In the absence of documents for ownership of the property, the factum of execution of sale agreement cannot be accepted -No prudent man will purchase any property from anyone which is not owned by him - this is the case where the assessee has raised certain funds for investment and onus is upon him to prove the same - It is for the assessee to place the relevant evidence to establish that he in fact has received the amount of ₹ 8.80 lakhs from the buyer on execution of sale agreement - assessee has badly failed to discharge his onus - the claim of the assessee that receipt through execution of sale agreement is also one of the sources of investment, cannot be accepted thus, the order of the CIT(A) is set aside and the AO is directed to compute the addition. Availability of funds on redemption of investment Held that - The details of year-wise investments were not furnished in order to ascertain the nature and quantum of capital gain - the assessee has not offered any capital gain on redemption of these Mutual funds - the CIT(A) had accepted the claim - this issue was not properly examined by the CIT(A) in the light of year-wise investment in Mutual funds and its redemption and also nature of holdings and nature and quantum of capital gain accrued in the impugned assessment year thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication Decided partly in favour of revenue.

Issues Involved:
1. Deletion of addition on account of unexplained investments in Mutual Funds and cash deposits.
2. Acceptance of agricultural income as a source of investment.
3. Acceptance of GPF withdrawal as a source of investment.
4. Acceptance of advance received against sale of property as a source of investment.
5. Acceptance of cash loan from an NRI as a source of investment.
6. Acceptance of redemption of investments from earlier years as a source of investment.
7. Discrepancy in the amount invested in TATA Assets Management Ltd.

Comprehensive, Issue-Wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Investments:
The main issue in this appeal is the addition of Rs. 51,81,514/- made by the Assessing Officer (AO) on account of unexplained investments under various heads. The assessee contended that the actual investment was Rs. 43,40,457/- and not Rs. 61,09,693/-, out of which Rs. 9,28,179/- was already accepted by the AO. The CIT(A) prepared a chart comparing the investments as per the AO and the assessee, noting discrepancies in the figures, particularly in TATA Assets Management and HDFC Mutual Fund.

2. Acceptance of Agricultural Income as a Source of Investment:
The AO disputed the assessee's claim of Rs. 1 lakh from agricultural income since it was not declared in the return of income. The CIT(A) accepted the claim, stating that non-disclosure in the return does not negate the existence of agricultural income. However, the Tribunal found this reasoning flawed due to the absence of documentary evidence and set aside the CIT(A)'s order, restoring the AO's decision.

3. Acceptance of GPF Withdrawal as a Source of Investment:
The AO disallowed the claim of Rs. 3 lakhs withdrawn from GPF for house construction, arguing it could not be invested in TATA Assets Management. The CIT(A) accepted the claim, noting the irrelevance of the withdrawal purpose. The Tribunal found this unconvincing, as no evidence was provided to show the house was not constructed. The Tribunal set aside the CIT(A)'s order, restoring the AO's decision.

4. Acceptance of Advance Received Against Sale of Property:
The AO rejected the claim of Rs. 8.80 lakhs received from Mr. Mehboob Alam due to the lack of ownership proof of the property. The CIT(A) accepted the claim, suggesting the AO could have verified the advance. The Tribunal found the sale agreement to be a fake document, noting the requirement for registration under the Indian Registration Act and the absence of ownership proof. The Tribunal set aside the CIT(A)'s order, restoring the AO's decision.

5. Acceptance of Cash Loan from an NRI:
The AO did not accept the claim of Rs. 2.50 lakhs received in cash from Mohd. Naseem Mansoori, an NRI, due to the lack of confirmation. The CIT(A) accepted the claim based on a confirmation letter. The Tribunal found the confirmation letter insufficient, noting the lack of local address and evidence of the NRI's presence in India. The Tribunal set aside the CIT(A)'s order, restoring the AO's decision.

6. Acceptance of Redemption of Investments from Earlier Years:
The AO did not accept the claim of Rs. 21,43,986/- from the redemption of earlier investments due to the lack of date-wise details and non-declaration of capital gains. The CIT(A) accepted the claim based on the bank account statements. The Tribunal found the issue was not properly examined, noting the absence of year-wise investment details and capital gains. The Tribunal set aside the CIT(A)'s order and remanded the matter for re-adjudication with a direction to obtain a remand report from the AO.

7. Discrepancy in the Amount Invested in TATA Assets Management Ltd:
The AO noted an investment of Rs. 27,67,236/- in TATA Assets Management, while the assessee claimed it was Rs. 10 lakhs, explaining the difference as due to switches between schemes. The CIT(A) verified the details and accepted the assessee's claim, noting the AO's error in taking cumulative figures without considering switches. The Tribunal found no infirmity in the CIT(A)'s order and confirmed it.

Conclusion:
The Tribunal partly allowed the Revenue's appeal for statistical purposes, setting aside the CIT(A)'s orders on the issues of agricultural income, GPF withdrawal, advance from Mr. Mehboob Alam, cash loan from Mohd. Naseem Mansoori, and redemption of earlier investments, while confirming the CIT(A)'s order on the discrepancy in TATA Assets Management investments. The matter regarding the redemption of earlier investments was remanded for re-adjudication.

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