2015 (5) TMI 847 - AT - Income Tax

Undisclosed investment in the money lending business - CIT(A) deleted the addition - Held that - A bare reading of the assessment order shows that the Assessing Officer accepted the computation made by the assessee with regard to the outstanding amount at ₹ 23,52,000/- as per the transaction found in the seized material. The Assessing Officer also determined the outstanding amount as per the transaction entered in the seized material at ₹ 19,10,300/-. It is not known whether the outstanding amount on the date of search was ₹ 23,52,000/- or ₹ 19,10,300/-. The CIT(Appeals) without any discussion simply deleted the addition on the basis of the so called balance sheet said to be provided by the assessee. Since the facts are not clear from the orders of the lower authorities, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue with regard to unexplained investment in the money lending business is remitted back to the file of the Assessing Officer to examine the issue afresh in the light of the provisions of Section 158BB of the Income-tax Act, 1961 - Decided in favour of revenue for statistical purposes. Disallowance of bad debts - CIT(A) deleted the addition - Held that - Admittedly, the assessee has not maintained any books of account. Only during the course of search operation, certain materials were found which disclosed the investment made in the money lending business. The assessee claims that the seized material found during the course of search operation referred to an entry of bad debts. However, the Revenue disputed the same. The Ld. D.R. clarified that no such reference was there in the seized material regarding bad debts. Furthermore, the details of money lent to the individuals are not available and with whom the assessee written off the loan amount as bad debts is also not available. In the absence of such details, this Tribunal is of the considered opinion that the issue has to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the issue of bad debts to the extent of ₹ 16,60,000/- needs to be re-examined by the Assessing Officer. - Decided in favour of revenue for statistical purposes. Unaccounted investment in the money lending business - CIT(A) deleted the addition - Held that - The Revenue claims that the money lending business belongs to the assessee. However, the assessee claims that the investment was disclosed in the return filed by the assessee s son. The details of such assessment made in the assessee s son are not available on record. The sworn statement recorded from Shri Subramanian shows that the diary was written by his father. In fact, in response to Question No.19, he admitted that the documents are relating to Vijaya Finance and other finance of his family. He, according to the Ld. D.R., admitted that the money lending business belonged to him. In those circumstances, this Tribunal is of the considered opinion that the matter needs to be reconsidered after considering the assessment made in the hands of Shri Subramanian, the assessee s son. Accordingly, we issue remitted back to the file of the Assessing Officer for reconsideration in the light of the material available on record - Decided in favour of revenue for statistical purposes. Undisclosed investment in the construction of house at Arantangi & building at Karaikudi - contention of the assessee before this Tribunal is that the valuation has to be made only on the State PWD rates - Held that - We find much force in the contention of the assessee. State PWD rates have to be preferred when compared to the Central PWD rates. State PWD rates are prepared as per the local condition prevailing in the particular State. Therefore, this Tribunal is of the considered opinion that the valuation of the building has to be made only on the basis of State PWD rates. Accordingly, we set aside the orders of the lower authorities and the issue of cost of construction with regard to Aranthangi building is remitted back to the file of the Assessing Officer. - Decided in favour of assesse for statistical purposes.

Summary

Issues Involved:
1. Addition towards undisclosed investment in money lending business.
2. Claim of bad debts.
3. Unaccounted investment in money lending business.
4. Investment in the construction of a house at Arantangi.
5. Investment in the construction of a building at Karaikudi.
6. Cost of construction in other appeals.

Detailed Analysis:

1. Addition towards undisclosed investment in money lending business:
The first issue pertains to the addition of Rs. 12,00,300 towards undisclosed investment in the money lending business. The Revenue authorities found that the assessee made advances totaling Rs. 67,38,155 on 30.11.1997. The assessee claimed that Rs. 50,02,000 was the principal amount and Rs. 17,36,155 was the interest received. The Assessing Officer (AO) verified and accepted the assessee's computation but determined the outstanding amount as Rs. 19,10,300. The CIT(Appeals) deleted the addition based on the balance sheet. The Tribunal found the facts unclear and remitted the issue back to the AO for reconsideration under Section 158BB of the Income-tax Act, 1961, after giving the assessee a reasonable opportunity.

2. Claim of bad debts:
The second issue involves the assessee's claim of bad debts amounting to Rs. 16,60,000. The AO determined the total outstanding loan at Rs. 19,10,300 and found no entry of bad debts in the seized material. The CIT(Appeals) allowed the claim based on the seized material. However, the Tribunal noted the lack of detailed records and remitted the issue back to the AO for re-examination, ensuring the AO considers the issue afresh and provides the assessee with a reasonable opportunity.

3. Unaccounted investment in money lending business:
The third issue concerns an unaccounted investment of Rs. 29,37,400 in the money lending business, as recorded in a pocket diary seized during the search operation. The assessee's son admitted that the diary was written by his father, but the CIT(Appeals) deleted the addition, stating the business belonged to the son. The Tribunal found the details of the son's assessment were not available and remitted the issue back to the AO for reconsideration, including the assessment made in the son's hands.

4. Investment in the construction of a house at Arantangi:
The fourth issue involves an investment of Rs. 15,54,035 in the construction of a house at Arantangi. The AO referred the matter to the Departmental Valuation Officer (DVO) and determined the undisclosed income based on the valuation report. The CIT(Appeals) deleted the addition, claiming no seized material was found. The Tribunal noted the seized material and directed the AO to re-examine the issue using State PWD rates instead of Central PWD rates.

5. Investment in the construction of a building at Karaikudi:
Similar to the Arantangi house, the fifth issue involves an investment of Rs. 5,09,186 in the construction of a building at Karaikudi. The Tribunal directed the AO to re-examine the issue using State PWD rates and provide the assessee with a reasonable opportunity.

6. Cost of construction in other appeals:
The sixth issue in I.T.A. Nos.1207 & 1208/Mds/2011 pertains to the cost of construction. The assessee argued that the valuation should be based on State PWD rates, not Central PWD rates. The Tribunal found merit in the assessee's contention and remitted the issue back to the AO for re-examination using State PWD rates.

Conclusion:
In conclusion, the Tribunal allowed all three appeals of the Revenue for statistical purposes and remitted the issues back to the AO for reconsideration and re-examination, ensuring the AO uses appropriate valuation methods and provides the assessee with a reasonable opportunity.