2015 (7) TMI 682 - AT - Income Tax

Concealed income of assessee - what should be the sale consideration deemed to have been received by assessee for the purpose of computation of capital gain? - Held that - there is no dispute to the fact that while assessee in registered sale deed has shown sale consideration at ₹ 21,65,000, registering authority has valued the property for stamp duty purpose at ₹ 24,07,000. Therefore, the sale consideration as per section 50C, which assessee could be deemed to have received is the value adopted by SRO. In fact, not only AO adopted the said value for computing capital gain, but, ld. CIT(A) has also endorsed the view of AO. However, in spite of having held so, ld. CIT(A) in her own wisdom has chosen to delete the addition of ₹ 2,42,000. Revenue has also not challenged that decision. That being the factual position, we fail to understand how ld. CIT(A) can again direct AO to treat the amount of ₹ 2,42,000 as concealed income of assessee. We are at loss to understand under what provision of law such amount can be treated as income of assessee when the only provision under which the SRO value can be considered as deemed sale consideration received is section 50C of the Act. Therefore, once, ld. CIT(A) deleted the addition made by AO u/s 50C of the Act, under no other provision such amount can be assessed. Accordingly, we hold that the amount of ₹ 2,42,000 cannot be treated as concealed income of assessee. - Decided in favour of assessee. Addition on on account of low withdrawals for household expenses - Held that - The addition made on account of alleged low drawings for household expenditure is purely on conjectures and surmises. There is no material before AO to show that the monthly expenditure of ₹ 42,070 towards assessee s household needs is inadequate. While assessee has brought material on record to demonstrate the actual expenditure incurred by assessee towards education of his children and other household activities, AO has no evidence to back his quantification of monthly expenditure of ₹ 70,000. Considering the expenditure incurred by assessee on the education of his children as well as the fact that assessee is staying in his own house, expenditure shown by assessee towards household expenditure, in our view, is just and reasonable. On the other hand, monthly expenditure of ₹ 70,000 adopted by AO, in our view, is high and excessive and has no nexus with the material on record. In view of the aforesaid, we are unable to sustain the addition of ₹ 3,33,151 made by AO. Accordingly, we direct the AO to delete the same.- Decided in favour of assessee. Addition for non production of freight bills - Held that - As could be seen, assessee during the year has claimed the total expenditure of ₹ 1,58,41,375 on account of freight. Whereas, AO has disallowed only negligible amount of ₹ 26,700 out of the expenditure claimed by alleging that bills and vouchers to that extent was not produced by assessee. In our view, when AO has accepted almost 99.9% of the expenditure claimed by assessee by treating it as genuine, there is hardly any scope to believe that assessee would have inflated the expenditure to the extent of ₹ 26,700 only. Therefore, assessee s explanation that considering the nature of expenditure and volume of transaction some of the vouchers might have been lost is believable. Accordingly, we delete the addition of ₹ 26,700.- Decided in favour of assessee. Addition on account of cash found during the course of search and seizure operation - Held that - On perusal of the extract of cash book of M/s Maheswari Brothers, copies of which were submitted before us, it appears that the firm was having closing cash balance of ₹ 69,71,760.33 on 07/09/10. Therefore, assessee s explanation if considered along with availability of cash balance as per the cash book of M/s Maheswari Brothers and also the confirmation letter submitted by M/s MBG Commodities Pvt. Ltd. appears to be credible. As far as the balance cash of ₹ 3,83,250 is concerned, on perusal of the cash book extract of Shiva Shakti Transport, it is seen that the proprietary concern is also having sufficient cash balance in its books. Therefore, assessee s explanation cannot be brushed aside lightly. Moreover, as could be seen from the order of ld. CIT(A) in the concluding part of her finding she has observed that managing director of the group company Sri Bijay Kumar Mandhani has stated before the department that assessee has been paid his remuneration in cash. Ld. CIT(A), further observed, the statement of Sri Mandhani corroborates availability of cash at the time of search. That being the case, cash found cannot be treated as unexplained as it is linked to remuneration received in cash. Therefore, there being no positive evidence brought on record by department to controvert the claim of assessee that cash found belong to M/s Maheswari Brothers, whereas, the claim of assessee being backed by evidence, we are of the view that addition of ₹ 43,83,250 representing cash found at the time of search is not justified. Accordingly, we delete the same.- Decided in favour of assessee.

Summary

Issues Involved:
1. Treatment of Rs. 2,42,000 as concealed income (AY 2009-10).
2. Addition of Rs. 3,35,153 for low withdrawals for household expenses (AY 2010-11).
3. Disallowance of Rs. 26,700 for non-production of freight bills (AY 2010-11).
4. Addition of Rs. 3,23,500 for low withdrawals towards household expenditure (AY 2011-12).
5. Disallowance of Rs. 4,78,500 out of freight expenditure (AY 2011-12).
6. Addition of Rs. 43,80,250 on account of cash found during the search and seizure operation (AY 2011-12).

Detailed Analysis:

1. Treatment of Rs. 2,42,000 as Concealed Income (AY 2009-10):
The issue pertains to the direction of the CIT(A) to treat Rs. 2,42,000 as concealed income. The assessee had sold land for Rs. 21,65,000, but the value for stamp duty was Rs. 24,07,000. The AO treated the difference of Rs. 2,42,000 as extra sale consideration under section 50C of the Act and added it to the capital gain. Although the CIT(A) endorsed the AO's view, she deleted the addition, stating it was not based on incriminating material and directed the AO to treat it as concealed income. The Tribunal held that once the addition under section 50C was deleted, the amount could not be treated as concealed income under any other provision. Therefore, the appeal was allowed, and the amount could not be treated as concealed income.

2. Addition of Rs. 3,35,153 for Low Withdrawals for Household Expenses (AY 2010-11):
The AO added Rs. 3,35,153 to the income of the assessee, stating that the household expenses of Rs. 5,04,847 (Rs. 42,070 per month) were inadequate considering the social status, family size, and lifestyle. The CIT(A) confirmed the addition. However, the Tribunal found that the addition was based on conjectures and surmises without any material evidence. The assessee provided details of household expenditure, including education costs, and the AO had no evidence to support the higher monthly expenditure of Rs. 70,000. The Tribunal directed the AO to delete the addition, finding the claimed expenditure reasonable.

3. Disallowance of Rs. 26,700 for Non-Production of Freight Bills (AY 2010-11):
The AO disallowed Rs. 26,700 out of the total freight expenditure of Rs. 1,58,41,375 due to the non-production of proper bills and vouchers. The CIT(A) confirmed the disallowance. The Tribunal noted that AO accepted 99.9% of the expenditure as genuine and found the disallowance of Rs. 26,700 negligible and unsupported by evidence. The Tribunal believed the assessee's explanation that some vouchers might have been lost due to the volume of transactions and deleted the addition.

4. Addition of Rs. 3,23,500 for Low Withdrawals towards Household Expenditure (AY 2011-12):
This issue was similar to the one in AY 2010-11. The AO added Rs. 3,23,500, stating that the household expenses were inadequate. The CIT(A) confirmed the addition. Following the reasoning in AY 2010-11, the Tribunal found the addition based on conjectures and surmises without any material evidence. The Tribunal directed the AO to delete the addition, finding the claimed expenditure reasonable.

5. Disallowance of Rs. 4,78,500 out of Freight Expenditure (AY 2011-12):
The AO disallowed Rs. 4,78,500 out of the freight expenditure due to the non-production of proper bills and vouchers. The CIT(A) confirmed the disallowance. Although the disallowance was higher than in AY 2010-11, the Tribunal applied the same reasoning and deleted the addition, finding the disallowance unsupported by evidence.

6. Addition of Rs. 43,80,250 on Account of Cash Found During the Search and Seizure Operation (AY 2011-12):
During a search, Rs. 44,83,250 was found at the assessee's residence. The assessee claimed Rs. 40 lakh belonged to M/s Maheswari Brothers, and Rs. 3,83,250 was his own. The AO rejected the explanation and added the entire amount to the income. The CIT(A) confirmed the addition, doubting the credibility of the assessee's claim. The Tribunal found the assessee's explanation credible, supported by the cash book of M/s Maheswari Brothers and the confirmation letter from M/s MBG Commodities Pvt. Ltd. The Tribunal also noted that the CIT(A) acknowledged the cash linked to remuneration. Therefore, the Tribunal deleted the addition, finding no positive evidence to controvert the assessee's claim.

Conclusion:
The appeals for AYs 2009-10, 2010-11, and 2011-12 were allowed, with the Tribunal deleting the additions and disallowances made by the AO and confirmed by the CIT(A).