2015 (11) TMI 865 - AT - Income Tax

Addition on account of unexplained investment in construction of building - CIT(A) deleted the addition - Held that - Assessing Officer has noted that the assessee has maintained two sets of audited books of account signed by different Auditors, but in any case balance sheet submitted to the Revenue authorities disclosed investment in the building at ₹ 1,63,70,624/-. Therefore, the figure given in other books of account should not be accepted. Since the assessee itself has declared investment at ₹ 1,63,70,624/- and the DVO has estimated the investment at ₹ 1,71,79,700/-, the difference was of ₹ 8,09,376/- which is only 4.7% of the investment estimated by the DVO. The ld. CIT(A), having relied upon various judicial pronouncements, has rightly deleted the addition, as the benefit of difference upto 10% is to be allowed to the assessee. We accordingly find no infirmity in the order of the ld. CIT(A) on this issue and we confirm the same. Addition on surrendered income - Held that - Undisputedly Shri Sunil Kumar Jhunjhunwala has made a surrender of ₹ 1 crore on behalf of four office bearers of the assessee-society and respective office bearers have also declared this amount in their individual returns of income. From a careful perusal of the statement of Shri Sunil Kumar Jhunjhunwala of the compilation of the assessee, we find that in the entire statement he has explained the nature of activities of the assessee-society and its officer bearers. In response to question No.8, Shri Sunil Kumar Jhunjhunwala has surrendered an amount of ₹ 1 crore on behalf of himself and three more office bearers with an assurance that tax thereon would be paid upto 30.3.2009. Since the surrender was made in specific terms on behalf of office bearers, the same cannot be treated on behalf of the assessee. Therefore, we are of the view that the Assessing Officer has wrongly interpreted the surrender statement and treated the surrender of ₹ 1 crore in the hands of the assessee; whereas it was made on behalf of the office bearers. Decided in favour of assessee. Undisclosed investment in the purchase of land - Held that - the benefit of surrender statement in the hands of the individuals cannot be given to the assessee in order to explain the source of investment. In the light of these facts, we are of the view that the ld. CIT(A) has wrongly given the benefit of surrender statement in the hands of individual, to the assessee in order to cover up the unexplained investment. The assessee-society cannot blow hot and cold in the same breath. If the assessee wants to get the benefit of surrender statement against the undisclosed investment in the purchase of land, it has to own up the surrendered amount in its hands, but in the foregoing paras we have accepted the contention of the assessee that the surrender was made in the hands of the office bearers, therefore, no addition of the same can be made in the hands of the assessee. In that situation, no benefit of surrender statement can be given to the assessee in order to cover up the undisclosed investment in the land. We are, therefore, of the view that since the assessee has failed to explain the source of investment in the land of ₹ 40,26,460/-, the Assessing Officer has rightly made the addition of the same. We, therefore, set aside the order of the ld. CIT(A) on this issue and restore that of the Assessing Officer. - Decided in favour of revenue Unexplained funds in the shape of donations received from the students in the name of kit and uniform - Held that - The assessee has not filed complete details before the Assessing Officer during the course of assessment proceedings to justify the credit entry found in the name of Madhu Agarwal. The ld. CIT(A) though called remand report, but we are of the view that in the remand proceedings, the Assessing Officer has not examined the details available before him by making necessary verification. We are, therefore, of the view that in the interest of justice, the matter should be set aside to the Assessing Officer with a direction to re-adjudicate the issue in the light of evidence filed before the ld. CIT(A). We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to re-adjudicate the issue afresh after affording an opportunity of being heard to the assessee. The assessee is also directed to place all relevant evidence to justify the credit entries in the name of Madhu Agarwal along with bills and vouchers for expenses incurred in purchase of uniform kits, etc for students. Addition u/s 69C - Held that - We find that before the Assessing Officer the assessee has not made any effort to reconcile the statement. No doubt, if any amount is given to Shri. Sunil Kumar Jhunjhunwala in the imprest account, there should be details of its expenditure as to how the imprest amount was exhausted and it is for the assessee to furnish complete details in this regard before the Assessing Officer. But he did not do the same. Before the ld. CIT(A), the assessee tried to furnish some details and the ld. CIT(A) has taken cognizance of Annexure B-1 but he has not made any reference to Annexure B-15. Copy of Annexure B-1 is available at page 2 of the compilation of the assessee, in which total amount given to Shri. Sunil Kumar Jhunjhunwala is ₹ 4,92,830/-, but since Annexure B-15 is not available before us, we cannot make any comment with regard to the entries available therein. In the light of these facts, we are of the view that the ld. CIT(A) has not properly examined the issue in the light of both the documents. We are, however, of the view that in the interest of justice, the matter should be restored back to the Assessing Officer to re-examine the claim. Unexplained cash credit under section 68 - Held that - Undisputedly the assessee has not furnished complete details before the Assessing Officer despite various opportunities afforded to it and the Assessing Officer was forced to conclude that the deposits in the bank are unexplained cash deposits. If the deposits are made out of cash receipts from the students, there could have been proper record available with the assessee. But during the assessment proceedings, he has not furnished details with regard to the deposits in the bank account. Moreover, we also find force in the contention of the Assessing Officer that throughout the year fees from the students cannot be collected. Generally fees from the students are collected quarterly. But in the instant case, there are regular cash deposits in the bank accounts and onus is upon the assessee to explain the source of deposits. Keeping in view the totality of the facts and circumstances of the case, we are of the view that this issue was not properly examined by the ld. CIT(A) in the light of detailed evidence. We, therefore, set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to readjudicate the issue afresh in the light of evidence filed before the ld. CIT(A). Disallowance exemption under section 11 - Held that - The conclusive finding with with regard to exemption under section 11 of the Act and treatment of surplus depends upon the conclusion on the other issues on which the matter is restored to the Assessing Officer. Therefore, in the absence of complete conclusion on other issues, this issue cannot be adjudicated at this stage. Accordingly, we set aside this issue also to the Assessing Officer to re-adjudicate it in the light of his findings with respect to other issues on which the matter was restored to his file for adjudication

Summary

Issues Involved:
1. Deletion of addition under Section 69B of the Income-tax Act, 1961.
2. Deletion of addition based on the statement of the Secretary of the Institution.
3. Deletion of addition under Section 69B for undisclosed investment in land.
4. Deletion of addition of credited amount in Madhu Agarwal (Kit & Uniform) A/c.
5. Deletion of addition under Section 69C for unaccounted expenses.
6. Deletion of addition under Section 68 for unexplained cash deposits.
7. Allowing exemption under Section 11 of the Income-tax Act.

Detailed Analysis:

1. Deletion of Addition under Section 69B:
The Assessing Officer (AO) made an addition of Rs. 64,32,005/- as unexplained investment in the construction of a building based on a valuation report from the District Valuation Officer (DVO). The CIT(A) held the reference to the DVO as valid but deleted the addition, noting that the difference between the investment shown in the hard disk during the survey and the final account was nominal. The Tribunal upheld the CIT(A)'s decision, stating that the difference between the DVO's valuation and the disclosed investment was less than 10%, which is acceptable as per judicial precedents.

2. Deletion of Addition Based on Secretary's Statement:
The AO added Rs. 1,00,00,000/- based on the statement of the Secretary, who surrendered the amount on behalf of himself and other office bearers. The CIT(A) deleted the addition, noting that the surrendered amount was declared in the individual returns of the office bearers and not in the hands of the assessee-society. The Tribunal confirmed the CIT(A)'s decision, stating that the surrender was made on behalf of individuals and not the society.

3. Deletion of Addition under Section 69B for Undisclosed Investment in Land:
The AO added Rs. 40,26,460/- as undisclosed investment in land. The CIT(A) gave credit for the surrendered amount by the office bearers and deleted the addition. The Tribunal reversed the CIT(A)'s decision, holding that the benefit of the surrendered amount in the hands of individuals cannot be given to the assessee-society to cover up the unexplained investment. The Tribunal restored the AO's addition.

4. Deletion of Addition of Credited Amount in Madhu Agarwal (Kit & Uniform) A/c:
The AO added Rs. 58,65,817/- credited in the name of Madhu Agarwal, stating it was unexplained. The CIT(A) deleted the addition, accepting the assessee's explanation that the amount was for kit and uniform expenses. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for re-examination, directing the assessee to provide complete evidence to justify the credit entries.

5. Deletion of Addition under Section 69C for Unaccounted Expenses:
The AO added Rs. 14,65,480/- as unaccounted expenses based on impounded debit vouchers. The CIT(A) deleted the addition, accepting the assessee's explanation that the amount was given to the Secretary for expenses. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO, directing a re-examination of the claim with proper evidence.

6. Deletion of Addition under Section 68 for Unexplained Cash Deposits:
The AO added Rs. 3,93,48,486/- as unexplained cash deposits. The CIT(A) deleted the addition, accepting the assessee's explanation that the deposits were from cash fees received from students. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for a detailed examination of the evidence, directing the assessee to explain the source of deposits.

7. Allowing Exemption under Section 11:
The AO denied exemption under Section 11, treating the surplus as income of the assessee due to various disallowances. The CIT(A) allowed the exemption, deleting the additions. The Tribunal noted that the final decision on exemption under Section 11 depends on the conclusions of the restored issues. Therefore, the Tribunal set aside this issue to the AO for re-adjudication based on the findings of the other issues.

Conclusion:
The Tribunal upheld the CIT(A)'s deletion of the addition under Section 69B for construction investment and the addition based on the Secretary's statement. However, it reversed the CIT(A)'s deletion of the addition for undisclosed investment in land, and set aside the deletions of additions for credited amount in Madhu Agarwal's account, unaccounted expenses, and unexplained cash deposits, restoring these matters to the AO for re-examination. The exemption under Section 11 was also set aside for re-adjudication by the AO. The appeal of the Revenue was partly allowed for statistical purposes.