2015 (11) TMI 403 - AT - Income Tax

Unexplained credit u/s.68 - Out of 6000 persons only 14 of them have given confirmation saying that they have given deposit - Assessing Officer considered 15% deposit as genuine and the balance he considered as unexplained income - Held that - In the present case, the Assessing Officer had given ample of opportunity at various level to prove the genuineness of the deposits. Inspite of this, the assessee failed to prove the genuineness of the deposits. In our opinion, no useful purpose will be served by remitting the issue back to the file of the Assessing Officer for fresh consideration. Hence, the order of the Assessing Officer is confirmed. This ground of the appeal of the assessee is rejected. Disallowance treating purchase of newsprint from capital market as undisclosed income of the assessee - Held that - Since the stock appeared to have been used by the assessee himself or it was lying in stock with him, the assessee derived benefit from this business. Such benefit needs to be made eligible to tax within the meaning of section 28(i). Alternatively, it was proposed that the assessee can be assessed under section 41(1) of the Act for the cessation of liability. The assessee did not respond to the proposal. As such, the Assessing Officer included the sum as the undisclosed income of the assessee for the assessment year 1996-97 in the light of the definition of undisclosed income contained in section 158B(b) of the Act. No particular argument was advanced in his regard at the time of hearing. Order was contested on the ground of opportunity. Having heard both the parties and after perusing the records, we uphold the order of the Assessing Officer on this count. - Decided against assessee. Advance paid to Mr. Vivek treated as undisclosed income - Held that - We find there is no entry with regard to advance to Mr. Vivek in the cash flow statement. Being so, we consider this amount as undisclosed income of the assessee. Accordingly, this ground of the appeal of the assessee is rejected.- Decided against assessee Fixed deposits in Canara bank treated as undisclosed income - Held that - There are entries for E65,000/- for the assessment year 1987-88 and E1,00,000/-for the assessment year 1992-93. Being so, we direct the Assessing Officer to give due credit to the tune of E1,65,000/- only. This ground of the appeal of the assessee is partly allowed. Difference in cost of construction which was treated as undisclosed income - Held that - The addition is made only based on the DVO report and the variation between the amount shown by the assessee for construction and the DVO report which is less than 10.4% and there is no seized material reflecting this addition. Being so, we are inclined to delete the addition. This ground of the appeal of the assessee is allowed.- Decided against revenue E1,94,000/-being the personal expenses which was treated as undisclosed income - Held that - The addition is only based on estimation and there is no seized material available on record to suggest the personal expenses. Being so, we delete the addition made by the Assessing Officer on this count.- Decided against revenue Purchase of E2,15,000/- as household articles which was treated as undisclosed income - Held that - There is no seized material found during the course of search suggesting this addition. The addition is made only on estimation basis hoping that they were purchased during the course of block period. The assessee is being a senior person having means to purchase these articles from known sources as there is no evidence to suggest that it has acquired from unaccounted income of the assessee. Accordingly, this addition is deleted. This ground of the appeal of the assessee is allowed.- Decided against revenue Deposits in Canara bank - Held that - In the cash flow statement these deposits was not reflected in the respective assessments years. Being so, it is treated as undisclosed income of the assessee. This ground of the appeal of the assessee is dismissed. - Decided against assessee Unaccounted investment of E1,00,000/- for the assessment year 1991-92 - Held that - This amount of E1,00,000/- was reflected in the cash flow statement for the year ending 31.03.1991. Accordingly, this ground of the appeal of the assessee is allowed. - Decided against revenue Unexplained Gift payment - Held that - These gifts are reflected in the cash flow statement for the financial year ending 31.03.1992 for E20,000/-, 31.03.1993 for E20,000/-. 31.3.1994 for E25,000/-, 31.03.1995 for E25,000/- and 31.03.1996 for E30,000/-, totaling to E1,20,000/-. Being so, we find that the assessee has explained this expenditure and accordingly, this addition is deleted. This ground of the appeal of the assessee is allowed.- Decided against revenue Investment in Tamilarasi which was treated as undisclosed income - Held that - This amount of E52,500/- was reflected in the cash flow statement for the year ended 31.03.1992. Being so, the addition cannot be made. Hence, we delete the addition made by the Assessing Officer. Accordingly, this ground of the appeal of the assessee is allowed. - Decided against revenue Purchase of land at Thanjavur treated as undisclosed income - Held that - These amounts reflected in the cash flow statement at E1,24,000/-as on 31.3.1992 and E89,000/- as on 31.03.1993. Being so, the additions are deleted as the assessee has explained the investments. This ground of the appeal of the assessee are allowed.- Decided against revenue Interest suspense account - Held that - The assessee has not furnished the details of these expenditure. In our opinion, whenever assessee claimed an expenditure it should be incurred wholly and exclusively for the purpose of business. In the absence of any evidence to substantiate this expenditure, we decline to appreciate the argument of the assessee counsel. This ground of the appeal of the assessee is rejected.- Decided against assessee Unexplained credits which was treated as undisclosed income - Held that - The Assessing Officer has given ample of opportunities to prove the identity, genuineness and creditworthiness of the transactions. Whenever any amount found credited in the books of account of the assessee in the previous year relevant to the assessment year, it is the duty of the assessee to prove the above ingredient of the transaction. Since the assessee was not able to produce necessary evidence to prove the transaction with the supporting evidence, we are inclined to confirm the addition in respect of these substantive credits. Hence, this ground of the appeal of the assessee is dismissed.- Decided against assessee Credit card payments which was treated as undisclosed income - Held that - These credit card payments are not reflected in the cash flow statement. In our opinion, the credit card payments cannot be considered as explained. Being so, this addition is sustained. This ground of the appeal of the assessee is rejected.- Decided against assessee Undisclosed investment in jewellery - Held that - In the cash flow statement for the year ending 31.03.1996, this amount of E2,00,000/- was not reflected in the cash flow statement filed before us. Being so, the addition of E2,00,000/- is sustained. This ground of the appeal of the assessee is dismissed.- Decided against assessee Undisclosed foreign travel expenses - Held that - The contention of the ld. Authorised Representative for assessee is that addition is made only on estimation basis in the block assessment. One cannot estimate the expenditure in block assessment without any seized material suggesting the expenditure. Being so, we are remitting this issue back to the file of the Assessing Officer to verify the nexus between the seized material and the expenditure incurred and decide the issue afresh and if there is no seized material in respect of this addition, the Assessing Officer cannot make addition on this count. This issue is remitted back to the Assessing Officer for fresh consideration. This ground of the appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Treatment of 85% of the subscribers' deposits as undisclosed income.
2. Disallowances/additions while computing the total undisclosed income of the block period.
3. Validity of additions made without the approval of the concerned authority under sec.158BG.
4. Purchase of newsprint from capital market.
5. Advance to Vivek.
6. Fixed Deposits with Canara Bank.
7. Difference in cost of construction.
8. Personal expenses.
9. Household articles.
10. Deposits with Canara Bank.
11. Investment in UTI.
12. Gift to Master Vivek/Krishnapriya.
13. Investment in Tamilarasi.
14. Land at Thanjavur.
15. Deposits in Tamilarasi.
16. Interest suspense account.
17. Unexplained credits.
18. Credit card payments.
19. Unproved expenditures.
20. Unexplained investment in jewellery.
21. Foreign tour expenses.

Detailed Analysis:

1. Treatment of 85% of the subscribers' deposits as undisclosed income:
The assessee claimed deposits from 6000 subscribers, but only 14 confirmations were received. The Assessing Officer (AO) treated 85% of the deposits as unexplained income due to lack of evidence. The ITAT confirmed this decision, noting that the assessee failed to substantiate the deposits despite ample opportunities.

2. Disallowances/additions while computing the total undisclosed income of the block period:
The AO made various disallowances and additions based on the lack of supporting evidence and discrepancies in the assessee's records. These included personal expenses, household articles, and unexplained credits. The ITAT upheld these additions where the assessee failed to provide satisfactory explanations or evidence.

3. Validity of additions made without the approval of the concerned authority under sec.158BG:
The ITAT discussed the procedural requirements for filing additional grounds and the necessity for the assessee or AO to sign and verify appeals. The additional grounds filed by the Authorized Representative were dismissed as non-maintainable due to non-compliance with procedural requirements.

4. Purchase of newsprint from capital market:
The AO added Rs. 7,50,000 as undisclosed income, stating that the newsprint was not returned to the supplier. The ITAT upheld this addition, noting the lack of credible evidence for the return of the newsprint.

5. Advance to Vivek:
The AO treated Rs. 1,50,000 as undisclosed income due to insufficient explanation. The ITAT confirmed this decision, finding no entry in the cash flow statement to support the advance.

6. Fixed Deposits with Canara Bank:
The AO added Rs. 1,65,000 as undisclosed income. The ITAT directed the AO to give credit for the amounts reflected in the cash flow statement, allowing the appeal partly.

7. Difference in cost of construction:
The AO added Rs. 5,19,000 based on a valuation report. The ITAT deleted this addition, noting the absence of seized material and the minor variation between the reported and estimated costs.

8. Personal expenses:
The AO estimated personal expenses and added Rs. 1,94,000 as undisclosed income. The ITAT deleted this addition, stating that estimations without seized material are not permissible in block assessments.

9. Household articles:
The AO added Rs. 2,15,000 based on the estimated value of household articles. The ITAT deleted this addition, emphasizing the lack of evidence for unaccounted income.

10. Deposits with Canara Bank:
The AO added Rs. 28,53,778 as undisclosed income due to unverified deposits. The ITAT upheld this addition, noting the absence of these deposits in the cash flow statement.

11. Investment in UTI:
The AO added Rs. 1,00,000 as undisclosed income. The ITAT deleted this addition, finding it reflected in the cash flow statement.

12. Gift to Master Vivek/Krishnapriya:
The AO added Rs. 1,20,000 as undisclosed income. The ITAT deleted this addition, noting the gifts were reflected in the cash flow statement.

13. Investment in Tamilarasi:
The AO added Rs. 52,500 as undisclosed income. The ITAT deleted this addition, finding it reflected in the cash flow statement.

14. Land at Thanjavur:
The AO added Rs. 2,13,000 as undisclosed income. The ITAT deleted this addition, noting it was reflected in the cash flow statement.

15. Deposits in Tamilarasi:
The AO added Rs. 2,12,310 as undisclosed income. The ITAT deleted this addition, finding it reflected in the cash flow statement.

16. Interest suspense account:
The AO added Rs. 4,23,460 as undisclosed income due to lack of details. The ITAT upheld this addition, noting the absence of supporting evidence.

17. Unexplained credits:
The AO added various amounts as undisclosed income due to unverified credits. The ITAT upheld these additions, emphasizing the assessee's failure to prove the transactions.

18. Credit card payments:
The AO added Rs. 3,15,714 as undisclosed income. The ITAT upheld this addition, noting the payments were not reflected in the cash flow statement.

19. Unproved expenditures:
The AO disallowed various expenditures totaling Rs. 10,72,686. The ITAT remitted these issues back to the AO for fresh consideration, directing verification of whether these were reflected in regular books.

20. Unexplained investment in jewellery:
The AO added Rs. 2,00,000 as undisclosed income. The ITAT upheld this addition, noting the absence of this amount in the cash flow statement.

21. Foreign tour expenses:
The AO estimated foreign tour expenses and added Rs. 31,42,000 as undisclosed income. The ITAT remitted this issue back to the AO for fresh consideration, emphasizing the need for nexus with seized material.

Conclusion:
The ITAT partly allowed the appeal for statistical purposes, confirming some additions, deleting others, and remitting certain issues back to the AO for fresh consideration. The judgment emphasized the need for evidence and proper verification in block assessments.