2015 (7) TMI 567 - AT - Income Tax

Addition under section 69A - CIT(A) deleted the addition - Held that - Assessing Officer was not justified in making addition u/s 69A of the Act by treating the seized cash as unexplained money of the assessee. On careful consideration of the assessment order and impugned order of the CIT(A), we have no hesitation to hold that the Assessing Officer did not appreciate the explanation and evidence submitted by the assessee rather he ignored some important facts which were self speaking and the same were rightly considered and noted by the CIT(A) while granting relief to the assessee and in deleting the impugned addition of ₹ 25.75 lakh made by the AO u/s 69A of the Act. - Decided against revenue. Period of limitation - whether cross objections are time barred in view of provision of Section 253(4) ? - Held that - the appeal was filed on 03.10.2011 and case was fixed for first hearing on 05.12.2011. From the record, we also see that no notice was issued to the assessee for the first date of hearing that was 05.12.2011 and the assessee approached the Assistant Registrar of ITAT, New Delhi firstly on 28.02.2012 and requested to provide copy of Form No.36 along with grounds of appeal raised by the Revenue. The assessee subsequently filed reminder/applications on 03.10.2013, 22.02.2013 and 05.03.2013 with the same request which was finally redressed on 13.03.2013 when the Assistant Registrar, ITAT, Delhi directed to provide copy of grounds of appeal to the assessee. In pursuance to last application dated 05.03.2013 admittedly assessee filed cross objection on 04.04.2013. In this situation, we are of the view that when the assessee has established that no notice along with copies of Form No.36 and grounds of appeal of the Revenue were served upon the assessee and the assessee could get copies of Form No.36 and grounds of the Revenue after restless efforts only on 13.03.2013 then the time limit prescribed in Section 253(4) of the Act would be reckoned only after receipt of complete notice along with copies of Form No.36 and grounds of appeal of the Revenue which is on 13.03.2013 in the present case. Hence, thus cross objection filed on 04.04.2013 cannot be alleged and held as time barred. Accordingly, legal objection of the Revenue is dismissed. Understatement of sale consideration of the property situated at 9/100, Shastri Gali, Vishwas Nagar, Shahdra, Delhi - CIT(A) deleted the addition - Held that - From careful reading of assessment order as well as order of the CIT(A) the assessee has not submitted any evidence in support of this contention that the property was sold to a person who was already occupying the property in issue as tenant and there were court cases and other dispute under which the property was sold to the person who was already in possession of the property and, therefore, the assessee got less consideration in comparison to the fair market value. In this situation, we are an agreement with the conclusion of the authorities below, the estimate made by the Assistant Valuation Officer has not been demolished and rebutted by the assessee with the quite plausible explanation or acceptable evidence, therefore, view taken by the Assessing Officer and upheld by the CIT(A) is justified and we are unable to see any infirmity or any other valid reason to interfere with the same on account of addition of ₹ 1.77 lakh made by the AO. At the same time, we further observed that the Assessing Officer made addition of ₹ 5,00,000/- by treating a gift as a part of sale consideration in respect of impugned property. The CIT(A) observed that AO has failed to adduce cogent evidence and record in support of understatement of sale consideration by the assessee in respect of said addition of ₹ 5,00,000/-. The Ld. counsel of the assessee has placed reliance on the judgments of Hon ble Apex Court in the cases of CIT Vs. George Henderson Co. Ltd. reported in (1967 (4) TMI 18 - SUPREME Court), CIT Vs. Gillanders Arbuthoot & Co (1972 (9) TMI 13 - SUPREME Court), K.P. Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court), CIT Vs. Shivakami Co. (1986 (3) TMI 2 - SUPREME Court ) and CIT Vs. Godawari Corpn. Ltd. (1992 (9) TMI 3 - SUPREME Court) and ratio of these decisions is that unless there is evidence that more than what was stated in the sale deed, was received no higher price or value can be taken to be the basis for computation of capital gains. In the present case, the CIT(A) rightly noted that Assessing Officer had failed to bring any evidence against the assessee to establish of record that there was understatement of sale consideration by the assessee by ₹ 5,00,000/- which was received by the assessee in the garb of gift in the name of Shri Ashish Jain son of assessee. - Decided against revenue. Undisclosed income - assessee had received a payment of ₹ 5,00,000/- from M/s J.V. Industries Pvt. Ltd - CIT(A) deleted addition - Held that - The confusion arose before the AO due to incompleteness in the facts and details submitted before the AO which were subsequently explain by way of filing details submission, statement of Bank account and other relevant details during first appellate proceedings. Admittedly, the assessee offered long term capital gain to the extent of ₹ 3,47,817/- on the sale of 10,000 shares of M/s J.V. Industries Pvt. Ltd. which were sold to M/s Nirman Securities Ltd. and the assessee received sale consideration through account payee cheque which was also credited to his saving Bank account. Under above noted facts and circumstances, we are an agreement with the conclusion of the CIT(A) that the assessee satisfactorily explained the source of ₹ 5,00,000/- and its further used for repayment of advance against sale agreement and in this situation addition made by the AO was rightly deleted by the first appellate authority. We are unable to see any infirmity or any other valid reason to interfere with the impugned order in this regard and we upheld the same - Decided against revenue. Addition in the hands of the assessee holding that Shri Ashish Jain was a minor - unexplained source of repayment of advance to Shri Vinod Kumar Jain against the sale agreement - CIT(A) deleted addition - Held that - When the amount of gift was routed through banking channels from donor Smt. Kaushalya Jain to donee Shri Ashish Jain which was further advanced as loan to the assessee, then it may also be presumed that the gift was given by Smt. Kaushalya Jain to the minor son of the assessee out of love and affection and also to clear the clouds and bitterness in the relations between with her brother i.e. the assessee. Under above noted facts and circumstances, we have no hesitation to hold that the CIT(A) after considering the detailed submission of the assessee rightly concluded that the addition of ₹ 5,00,000/- on amount of unexplained source of repayment of advance to Shri Vinod Kumar Jain against the sale agreement is not sustainable. We are unable to see any infirmity, perversity or any other valid reason to interfere with the same - Decided against revenue. Unaccounted receipt of cash claimed to have been received from Sheel Kumar Jain - CIT(A) deleted addition - Held that - When admittedly Shri Sheel Kumar Jain was expired on 02.11.2005 prior to finalization of assessment order on 19.12.2006 then it was not possible for the assessee to produce Late Shri Sheel Kumar Jain during assessment proceeding. The Assessing Officer could have verified the factum of repayment of advance to Shri Sheel Kumar Jain by examining and verifying the statement of accounts inter alia the capital account of the assessee with his sole proprietary firm M/s Jain Metal Works but instead of making any further enquiry examination or verification the Assessing Officer rejected the explanation and supportive evidence of the assessee at the threshold that without making any enquiry examination of verification and proceeded to make addition of ₹ 3,00,000/- without bringing doubt any sustainable allegation or incriminating material against the assessee and the same was rightly deleted by the first appellate authority with the aforesaid disallowances and conclusion. We decline to interfere of the conclusion of the CIT(A) on this issue - Decided against revenue. Rejection of books of accounts - Enhancement of income of the assessee by AO adopting average GP rate of preceding assessment years and in making addition of ₹ 16,96,788/- - CIT(A) deleted the addition - Held that - No hesitation to hold the Assessing Officer reject the books of account of the assessee without any valid reason and without following due procedure as per provision of the Act and without any justified and cogent basis and the rejection of books of account AO was rightly dismissed by the CIT(A). Turning to the issue of addition of ₹ 16,96,788/- applying difference of GP rate of 4.1% calculated on the basis of average of GP rate of immediately preceding three assessment years, we note that since the rejection of books of account have not been found to be sustainable then the Assessing Officer cannot be held as justified in making the addition by applying difference in GP rate of 4.1% on the basis of average of preceding three years and addition in this regard cannot be held as sustainable and in accordance with law in absence of justified and reasonable basis. We are of the considered opinion that if explanation, evidence or any material is submitted by the assessee in support of its return then it should be accepted after due examination and verification and unless the same is controverted or rebutted by the cogent admissible evidence by the AO arbitrary addition by taking 4.1% difference is not correct. We, therefore, are of the considered opinion that considering the G.P. rate of the earlier three years the G.P. rate of 5% of turnover would be most appropriate and justified. Hence, we direct the AO to adopt 5% of G.P. rate and calculate the disallowance accordingly. Accordingly, Ground Nos. 7 & 7.1 of the revenue are restored to the file of the AO for the limited purposes as directed above. - Decided partly in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Deletion of addition under Section 69A of the Income Tax Act, 1961.
2. Deletion of addition on account of understatement of sale consideration of property.
3. Deletion of addition on account of unaccounted source of repayment of advance against sale agreements.
4. Deletion of addition on account of unexplained source of repayment of property advance.
5. Deletion of addition on account of unaccounted receipt of cash.
6. Deletion of addition on account of low GP Ratio.
7. Cross objection regarding the addition of Rs. 1,77,000/-.

Issue-wise Detailed Analysis:

1. Deletion of addition under Section 69A of the Income Tax Act, 1961:
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 25,75,000/- made by the AO under Section 69A. The AO contended that the evidence provided by the assessee regarding the sources of cash was inherently defective and an afterthought. However, the CIT(A) found that the assessee had satisfactorily explained the sources of cash, including advance money received from M/s JMW (India) Pvt. Ltd. and M/s JV Industries (P) Ltd. The Tribunal agreed with the CIT(A), noting that no law requires advance money to be paid only through account payee cheques and that both parties confirmed the transactions. The Tribunal upheld the deletion of the addition, concluding that the AO had not appreciated the evidence properly.

2. Deletion of addition on account of understatement of sale consideration of property:
The Revenue argued that the CIT(A) erred in deleting Rs. 5,00,000/- out of an addition of Rs. 6,77,000/- made by the AO for understatement of sale consideration. The AO had based the addition on the Assistant Valuation Officer's report, which estimated the fair market value of the property at Rs. 9,77,000/-. The CIT(A) concluded that the AO failed to provide evidence of understatement of sale consideration and that the valuation report alone was insufficient. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not brought any evidence to show that the assessee received more than the declared amount.

3. Deletion of addition on account of unaccounted source of repayment of advance against sale agreements:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 5,00,000/- made by the AO for unaccounted repayment of advance. The AO argued that the assessee had used undisclosed income for repayment. The CIT(A) found that the assessee had satisfactorily explained the source of repayment, which was the sale of shares of M/s JV Industries Pvt. Ltd. to M/s Nirman Securities Ltd. The Tribunal agreed with the CIT(A), noting that the assessee had provided sufficient evidence, including bank statements and confirmations, to support the transaction.

4. Deletion of addition on account of unexplained source of repayment of property advance:
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 5,00,000/- made by the AO for unexplained repayment of property advance. The AO contended that the assessee's explanation was not tenable due to the alleged dispute with his sister, Mrs. Kaushalya Jain. The CIT(A) found that the assessee had provided evidence of a gift from Mrs. Kaushalya Jain to his son, which was used for the repayment. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not verified the bank accounts or the creditworthiness of the donor and that the explanation provided by the assessee was plausible.

5. Deletion of addition on account of unaccounted receipt of cash:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 3,00,000/- made by the AO for unaccounted receipt of cash from Shri Sheel Kumar Jain. The AO argued that the assessee's explanation was not verifiable due to the death of Shri Sheel Kumar Jain. The CIT(A) found that the assessee had provided sufficient evidence, including capital account statements, to support the transaction. The Tribunal agreed with the CIT(A), noting that the AO had not made any further verification or examination and that the addition was made without sustainable evidence.

6. Deletion of addition on account of low GP Ratio:
The Revenue argued that the CIT(A) erred in deleting the addition of Rs. 16,96,788/- made by the AO for low GP ratio. The AO had rejected the books of account and applied an average GP rate of preceding years. The CIT(A) found that the AO had not provided any specific defects in the books of account and that the rejection was not justified. The Tribunal upheld the CIT(A)'s decision, noting that the AO had not followed the due procedure for rejecting the books of account and that the addition was not sustainable without a justified basis.

7. Cross objection regarding the addition of Rs. 1,77,000/-:
The assessee's cross objection was regarding the addition of Rs. 1,77,000/- for understatement of sale consideration. The CIT(A) had upheld this addition based on the Assistant Valuation Officer's report. The Tribunal found that the assessee had not provided sufficient evidence to rebut the valuation report and upheld the CIT(A)'s decision.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions on most issues, finding that the AO had not properly appreciated the evidence and had made additions without justified reasons. The Tribunal dismissed the Revenue's appeal on all grounds except for the issue of low GP ratio, which was partly allowed by directing the AO to adopt a GP rate of 5% and calculate the disallowance accordingly. The assessee's cross objection was dismissed.