2015 (4) TMI 54 - AT - Income Tax

Bogus donations - Quantification of donation of gold to Shri Shirdi Sansthan by director and family members of the company - CIT(A) quantified donation at 114.590 kg as against 124.253 kg that the assessee himself has quantified the same - as per revenue the source of income was nothing but diversion of funds in the guise of subcontract to Sri N. Srinivasa Rao - search conducted - Held that - This is a case of search under section 132 of the Act. The Department framed the assessment under section 153A of the Act after the search. As per the provisions of section 153A the Assessing Officer is required to determine the income on the basis of material available on record consequent to search action under section 132 of the Act. The Assessing Officer is precluded from collection of any confession statement in the course of search action and base the addition on that basis. The Central Board of Direct Taxes Instruction No. 286/2/2003-IT (Inv.) dated March 11, 2003 strictly prohibits placing reliance on the confession statements. The Assessing Officer cannot presume the income of the assessee for the period covered by section 153A on the basis of confession statement. The Assessing Officer is required to bring on record positive material in support of the addition. The addition made by the Assessing Officer in the present case is contrary to the evidence brought on record. The addition made on the basis of statement recorded from the assessee or from the assessee's son which is not recorded under section 132(4) of the Act. It is recorded consequent to the post search enquiry and that statement was also retracted by the assessee. The Assessing Officer herein made the addition only on the basis of statement of the assessee's son dated April 26, 2010. The contents of this statement were retracted vide letter dated December 28, 2010. Being so, the assessment is not based on any cogent material. The assessment cannot be made on the basis of probability. It should be based on the evidence brought on record. In our opinion, tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. The assessee out of ignorance included income as taxable in the return and it approached the court to direct the Assessing Officer to exclude said amount from assessable income then an appropriate decision is to be taken. The plea of the Revenue was that the Department could not be faulted for accepting returns filed by the assessee where he himself had offered the donations for tax. The plea of the Department cannot be accepted in view of the judgment in the case of S. D. S. Mongia v. CBDT 2006 (11) TMI 621 - DELHI HIGH COURT wherein held that the Revenue is not entitled to tax the income which was offered by the assessee himself though it is not taxable and it should tax only that amount which is chargeable under section 4 of the Income-tax Act, 1961. CIT(A) should have appreciated that all the incriminating evidences available in the seized documents were considered by the Deputy Director of Income-tax (Investigation) in toto in course of post search investigation in the hands of individual and also by the Assessing Officer in the course of assessment proceeding and undisclosed income resulting from these seized papers were to be considered in the assessment of the assessee leaving no room for any further addition in the hands of the assessee on the basis of offer by the assessee, in such circumstances there could be no undisclosed income in the hands of the assessee particularly on the basis of receipts relating to donation as the impugned receipt is not in the name of the present assessee. Also have appreciated the salutatory principle that the income-tax is a levy on income. The substance of the matter is the income. If income does not result at all, there cannot be a tax, even though there is offer by the assessee which did not materialise. Thus the evidence brought on record is not enough to sustain the addition in the hands of the assessee. The ground raised by the assessee in his cross-objection with regard to addition towards donation of gold to Shiridi Saibaba Sansthan is allowed. - Decided in favour of assessee. Addition of ₹ 18 lakhs in the name of Sri N. Srinivasa Rao under section 68 - CIT(A) deleted the addition - Held that - The contract works awarded by M/s. AMRCL was disbelieved and the additions were made in the hands of M/s. AMRCL on the said account. Further, the amount of contract receipts appears to have already suffered tax in the hands of the company, as such there is no basis for making the addition originating from the same amounts in the hands of the assessee, being the loanee. On this count, the addition of ₹ 18,00,000 made on account of amount standing in the name of Mr. Srinivasa Rao Nukala, as unexplained credit is not sustainable. Accordingly, deletion by the Commissioner of Income-tax (Appeals) is confirmed.- Decided in favour of assessee. Addition of ₹ 13 lakhs under section 68 in the name of Lordven Enterprises - Held that - The onus is on the assessee to prove the transaction by explaining the same with reference to the above three factors on cumulative basis. In the absence of the same, the transaction cannot be treated as genuine one and as such the credit will be treated as unexplained credit. The ratios of the case laws cited by the Assessing Officer in the assessment order, more specifically the decision of the jurisdictional High Court in the case of R. B. Mittal v. CIT 2000 (8) TMI 54 - ANDHRA PRADESH High Court are very much relevant for the facts of the case. Accordingly, the treatment meted out by the Assessing Officer for the credit of ₹ 13,00,000 from M/s. Lordven Enterprises is held to be sustainable and as such the addition made on this count is confirmed. - Decided against assessee. Addition of ₹ 6 lakhs in the name of Sri Veerendra Kumar - Held that - Advance of ₹ 6,00,000 shown to have been received from Shri Veerendra Kumar towards the advance of property and the amount was returned in the same year since the transaction did not materialise. However, it has been observed that the amounts were received and repaid in cash and no confirmation in this regard was furnished either before the lower authorities. There was no indication as regard to the details of the transaction with which such amount was received and repaid. In absence of the needed explanation with evidences as regard to the genuineness of the transaction and creditworthiness of the creditor, it is held that provisions of section 68 are applicable. The provisions of section 68 put the onus on the assessee or assessee to explain the transactions with reference to the identity and creditworthiness of the creditor, apart from the genuineness of the transaction and we are of the opinion that the assessee had failed on this count. Hence, the amount of ₹ 6,00,000 received by Shri Veerendra Kumar, which was treated by the Assessing Officer as unexplained credit, is confirmed.- Decided against assessee.

Summary

Issues Involved:
1. Quantification of gold donation to Shri Shirdi Sansthan.
2. Admission of additional evidence by the Commissioner of Income-tax (Appeals).
3. Source of funds for the donation and its genuineness.
4. Addition towards donation of gold valued at Rs. 9,82,80,246.
5. Addition under section 68 of the Income-tax Act, 1961, for amounts received from Lordven Enterprises and Mr. Veerendra Kumar.

Detailed Analysis:

1. Quantification of Gold Donation:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in quantifying the gold donation to Shri Shirdi Sansthan at 114.590 kg instead of 124.253 kg as claimed by the assessee. The Tribunal noted that the receipts from Shirdi Saibaba Sansthan indicated a donation of 114.590 kg of gold. The assessee's family and associates were involved in the donation, and there was a discrepancy in the quantity of gold donated. The Tribunal upheld the Commissioner of Income-tax (Appeals)'s quantification based on the receipts.

2. Admission of Additional Evidence:
The Revenue argued that the Commissioner of Income-tax (Appeals) erred in admitting additional evidence (receipt from Shri Shirdi Sansthan) without giving the Assessing Officer an opportunity to examine it. The Tribunal did not specifically address this procedural issue in detail, focusing instead on the substantive issues of the case.

3. Source of Funds for the Donation:
The Revenue claimed that the source of the gold donation was unexplained and possibly a diversion of funds. The assessee argued that the gold was collected from friends and relatives for a noble cause. The Tribunal noted that the Department had conducted an enquiry, and about 70 donors confirmed their donations. The Tribunal emphasized that the burden of proving the genuineness of the donations was on the Department, which failed to provide contrary evidence.

4. Addition Towards Donation of Gold:
The assessee initially offered additional income of Rs. 7,67,74,956 but later retracted this offer, claiming it was conditional on the Department not conducting further enquiries. The Tribunal held that the addition based solely on the assessee's initial offer was not sustainable without corroborative evidence. The Tribunal relied on various judicial precedents, including the Supreme Court's rulings, to assert that admissions or offers made by the assessee are not conclusive and can be retracted if proved incorrect. Consequently, the Tribunal deleted the addition towards the donation of gold.

5. Addition Under Section 68:
- Lordven Enterprises (Rs. 13 lakhs): The Tribunal upheld the addition, noting that the assessee failed to provide sufficient evidence regarding the creditworthiness of Lordven Enterprises and the genuineness of the transaction.
- Veerendra Kumar (Rs. 6 lakhs): The Tribunal confirmed the addition, as the transaction involved cash payments and lacked proper documentation or confirmation from the creditor.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. The addition towards the donation of gold was deleted, while the additions under section 68 for amounts received from Lordven Enterprises and Mr. Veerendra Kumar were upheld. The stay application filed by the assessee was dismissed as infructuous.