2015 (2) TMI 946 - AT - Income Tax

Unexplained investment - block assessment - addition of ₹ 11 lacs on unexplained investment in Himmatpur land u/s 69 - assessee relying on the ancestral Bahi for explaining the cash payment of ₹ 11 lakhs to Kulanand Bhartiyaya on different dates paying from money accumulated out of agricultural income of assessee s father HUF named and styled of Durga Singh and Sons HUF - Held that - The assessee has placed on record to show that there was a HUF and such HUF had agricultural income as is evidenced by certificates issued by Patwari. Such income according to the Officer has been utilized for expenses of the family members though there is no evidence to that effect despite fresh innings having been granted to the Assessing Officer, yet it would be reasonable to appropriate percentage of such income towards the expenditure. We therefore find force in the contention of the appellant that monies was available for investment by the appellant out of the funds available with the HUF after appropriating 15% of the said receipt towards expenditure. We find from the details on record that agricultural income as per the certificates of Patwari for financial year 1986-87 upto financial year 1994-95 aggregates to ₹ 8,41,600/- and thus, out of the said sum an amount of ₹ 7,15,360/- can reasonably be assumed to be available with the appellant for investment for purchase of land from one Shri Kulanand Bhartiya. Accordingly, addition made of ₹ 7,15,360/- is deleted and balance sum of ₹ 3,84,640/- is upheld. - Decided partly in favour of assessee. Unaccounted cash - addition of ₹ 32,69,744/- out of the cash found as a result of search of ₹ 39,00,000/- - Held that - Assessee had placed on record evidence in the shape of statement of Shri Mohan Singh Rawat, affidavit of Shri Govind Sharma to establish that there was refund by Shri Kulanand Bharatiya to the appellant of ₹ 11 lacs. The statement being relied upon by the revenue of Shri Kulanand Bharatiya was not confronted to the assessee despite his repeated request and accordingly, we hold that such a statement has to be excluded as such. In view of the above, we hold that sum of ₹ 11 lacs is also available as evidence with the appellant to explain the source of availability of cash on the date of search with the appellant. Accordingly, the appellant is entitled to the benefit of ₹ 11 lacs and ₹ 1,23,250/- (85% of ₹ 1,45,000/-) being the agricultural income for the financial year 1995-96. Thus, the assessee is entitled to total benefit of ₹ 12,23,250/-. Accordingly, assessee is entitled to a relief of ₹ 31,73,250/-. The Assessing Officer has made addition of ₹ 32,69,744/- and if the amounts as stated above of ₹ 31,73,250/- is excluded, the balance sum of ₹ 96,494 /- is sustained and assessee is entitled to a relief of ₹ 31,73,250 /-. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 11 lacs on account of unexplained investment in Himmatpur land under section 69 of the Income Tax Act.
2. Addition of Rs. 32,69,744/- on account of unexplained cash.

Detailed Analysis:

1. Addition of Rs. 11 lacs on account of unexplained investment in Himmatpur land:

The appellant challenged the addition made by the Assessing Officer (AO) under section 69 of the Income Tax Act, 1961, regarding an unexplained investment of Rs. 11 lacs in Himmatpur land. The AO had relied on four seized receipts indicating payments made by the appellant to Shri Kulanand Bhartiya for land purchase. The appellant claimed the funds were sourced from agricultural income accumulated by his father's HUF, Durga Singh and Sons HUF, supported by entries in a "Bahi" (ledger) and certificates from the Village Patwari.

The ITAT, in its order dated 17.06.2009, had expressed doubts about the genuineness of the "Bahi" and the availability of such a large amount of cash. The AO, during fresh proceedings, reiterated these doubts, noting inconsistencies such as entries in the same ink and the absence of the medical officer's attestation on the "Bahi". Additionally, the AO questioned the plausibility of keeping large sums of cash at home for extended periods.

The appellant contended that the AO had accepted the ancestral nature of the land, thus validating the HUF's income. Despite this, the AO did not find the "Bahi" reliable and pointed out that the cash found at the appellant's premises in Delhi could not be linked to the agricultural income from the ancestral land in the village.

The Tribunal, after considering the evidence and submissions, concluded that while the "Bahi" could not solely substantiate the source of funds, the agricultural income certificates provided some credibility. It was reasonable to assume that a portion of the agricultural income could be available for investment after accounting for expenses. Consequently, the Tribunal allowed a partial relief, deleting the addition of Rs. 7,15,360/- and sustaining Rs. 3,84,640/-.

2. Addition of Rs. 32,69,744/- on account of unexplained cash:

The AO had originally added Rs. 39,27,840/- found during the search, explaining that Rs. 19.50 lacs belonged to Lachhman Singh & Sons HUF and Rs. 19.50 lacs to Durga Singh & Sons HUF. The Tribunal, in its earlier order, had directed the AO to provide the appellant an opportunity to cross-examine witnesses and re-examine the evidence.

During fresh proceedings, the AO relied on the original statements of witnesses who denied any transactions with Lachhman Singh & Sons HUF. The AO found the retractions and new statements provided by the appellant to be tutored and unreliable. Additionally, the AO questioned the plausibility of the agreements and the absence of receipts for large cash transactions.

The appellant argued that the AO had not considered the evidence properly, including the agreements and affidavits provided. The Tribunal noted that the AO had dismissed the appellant's evidence on suspicion without substantial counter-evidence. The Tribunal found the agreements and statements provided by the appellant to be credible, particularly since they predated the search and were registered documents.

Regarding the Rs. 19.50 lacs from Durga Singh & Sons HUF, the Tribunal had already allowed partial relief based on agricultural income certificates. The Tribunal further allowed the appellant's claim of Rs. 11 lacs refunded by Shri Kulanand Bhartiya, noting that the AO had not provided the appellant with the opportunity to cross-examine Shri Kulanand Bhartiya, whose statement was used against the appellant.

The Tribunal granted a total relief of Rs. 31,73,250/-, sustaining an addition of Rs. 96,494/-. The Tribunal emphasized the need for the AO to provide adequate opportunities for cross-examination and to rely on credible evidence.

Conclusion:

The appeal was partly allowed, with the Tribunal providing significant relief to the appellant by deleting substantial portions of the additions made by the AO. The Tribunal's decision underscored the importance of fair procedure, including the right to cross-examine witnesses and the necessity of credible evidence in tax assessments.