2015 (2) TMI 275 - AT - Income Tax

Unexplained investment - CIT(A) deleted the addition admitting fresh evidence without giving the AO an opportunity, violating norms of Rule 46A - Held that - As regards the addition of ₹ 4.50 crores, the assesse has categorically submitted that the payment regarding development agreement was made through account payee cheques which was duly mentioned in registered documents and in the books of account of the assessee however, the assessing officer without even getting a clarification from the Sub-registrar office has made the said addition. Such an uncorroborated AIR information cannot be said to sacrosanct that AO is even precluded from examining the facts or carry out any inquiry. The AIR information cannot be adversely viewed against the assessee if the assessee has rebutted the transaction reported in the said AIR. Here in this case, the Sub-registrar has duly clarified that, there was a mistake on their part in recording the amount in the column of cash and on said clarification given by a public authority, Ld.CIT(A) has deleted the addition. There is no question of violation of any Rule 46A. Regarding addition of ₹ 6,76,72,000/- it is amply clear from the records and the finding of the Ld.CIT(A) that the transaction relating to nine flats was on account of sale and not purchases, as wrongly understood by the AO. The assessing officer without even applying his mind on the nature of transaction, whether it is sale or purchase, has blindly relied upon uncorroborated AIR information. The assessee has adduced all the evidence before the AO including copy of sale agreements and the copy of ledger accounts, that it was a sale made to the various persons and not purchases. If this aspect has been clarified by the Sub-registrar, then it cannot be held that there was a violation of Rule 46A. Thus, such an addition has rightly been deleted by CIT(A). Regarding addition of ₹ 75 lakhs, it is seen that there was a double entry in the AIR details, the AO without applying his mind and also without verifying the assessee s contention has made the addition. Such an approach of the AO is wholly unjustified and uncalled for not only in law but also on facts. Thus, there is no merit in the grounds raised by the revenue and hence, same are dismissed. - Decided against revenue. Interest earned on the fixed deposit disallowed - Held that - Assessee has received deposits from the members of the housing society as corpus funds which was deposited with the bank in the form of FDR s . This amount was shown as liability towards society in the balance sheet. The interest earned on such deposits has also been treated as income of the society and liability of the assesse. The same has not been treated is income by the assesse as the money has been kept in the form of trust by the assesse. It has also been clarified by the learned counsel that the assessee has not taken any credit of the TDS deducted by the bank on such interest income. Once, the interest has been shown as income nor any credit of TDS has been taken, them, there is no reason to treat the interest income as assessee s income. Accordingly the interest income of ₹ 4,06,566/- added in the hands of the assessee stands deleted. - Decided in favour of assessee.

Issues Involved:
1. Deletion of addition of Rs. 4.5 Crore as unexplained investment under Section 69C.
2. Deletion of addition of Rs. 6,76,72,000/- as unexplained investment under Section 69B.
3. Deletion of addition of Rs. 75,00,000/- as unexplained receipts.
4. Violation of Rule 46A of the Income Tax Rules by CIT(A).
5. Addition of Rs. 4,06,566/- as interest earned on fixed deposits.

Detailed Analysis:

1. Deletion of Addition of Rs. 4.5 Crore as Unexplained Investment under Section 69C:
The assessee, engaged in the business of builders and developers, was reported to have deposited Rs. 4.5 crore in cash with the Joint Sub-registrar office, Kurla. The assessee contended that no such cash deposit was made and provided evidence that the payment was made through account payee cheques. The CIT(A) accepted the assessee's explanation, supported by a confirmation letter from the Deputy Sub-registrar, which clarified that the cash entry was a data entry error. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to verify the facts with the Sub-registrar and relied on uncorroborated AIR information.

2. Deletion of Addition of Rs. 6,76,72,000/- as Unexplained Investment under Section 69B:
The AO treated the sums aggregating Rs. 6,76,72,000/- as unexplained investment based on AIR information, which reported transactions with nine parties. The assessee explained that these transactions were sales of flats and not purchases. The CIT(A) accepted the assessee's explanation, supported by confirmation from the Sub-registrar and ledger accounts. The Tribunal upheld the CIT(A)'s decision, criticizing the AO for not applying his mind and relying on uncorroborated AIR information.

3. Deletion of Addition of Rs. 75,00,000/- as Unexplained Receipts:
The AO added Rs. 75 lakhs as unexplained receipts based on AIR information. The assessee clarified that there was a double entry in the AIR details. The CIT(A) accepted this explanation and directed the AO to delete the addition. The Tribunal upheld the CIT(A)'s decision, noting the AO's failure to verify the assessee's contention.

4. Violation of Rule 46A of the Income Tax Rules by CIT(A):
The Revenue argued that the CIT(A) admitted fresh evidence without giving the AO an opportunity to examine it, violating Rule 46A. The Tribunal found no violation, noting that the AO had refused to carry out necessary inquiries despite the assessee's requests. The Tribunal emphasized that the AO's failure to investigate and consider the evidence presented justified the CIT(A)'s acceptance of the additional evidence.

5. Addition of Rs. 4,06,566/- as Interest Earned on Fixed Deposits:
The AO added Rs. 4,06,566/- as interest earned on fixed deposits made out of corpus/proposed society funds, which the assessee claimed did not belong to it. The CIT(A) confirmed this addition. The Tribunal, however, deleted the addition, accepting the assessee's explanation that the interest was credited to the society's account and not claimed as income by the assessee. The Tribunal noted that the assessee did not claim any TDS credit on this interest.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection, confirming the CIT(A)'s deletions of the additions and addressing the Rule 46A violation concerns. The Tribunal also deleted the addition of Rs. 4,06,566/- as interest income, recognizing it as the society's income held in a fiduciary capacity by the assessee.

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