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2016 (1) TMI 677 - AT - Income TaxUnexplained cash paid for acquiring the right to dredge sand - CIT(A) deleted the addition on the ground that the assessee had explained the source of funds which is from agricultural income of the Chumble family which was kept in common family pool and it was introduced in the business as and when required - Held that -Considering the family holding of 93 Acres of agricultural land, where different crops such as Grapes, Khurasana, Tomato, Masur, Groundnuts and Vegetables are produced and considering the quantum of agricultural produce on the basis of established norms published by various institutions and authors and the rate for such agricultural produce certified by Nashik Krishi Utpanna Bazar Samiti, the Ld.CIT(A) accepted the source of common funds for investing in the sand dredge business. We find no infirmity in the order of the CIT(A). Although the assessee in his paper book has certified his reply was filed before the AO along with the enclosures, during the course of assessment proceedings, we find the AO in a cryptic manner has merely mentioned that moreover there appears to be a common source of fund . Once the AO accepts that there appears to be a common source of fund and when the family of the assessee owns more than 93 acres of agricultural land on which various crops are grown, therefore, we find force in the submission of the Ld. Counsel for the assessee that the money available from such agricultural activity is sufficient to meet the auction money required for the sand business. - Decided against revenue Addition on income from sand business activity - CIT(A) deleted the addition - Held that - Admittedly, the assessee has not declared any income from sand business activity. The additional income so declared in the return filed in response to notice u/s.153A is on account of writing off of certain sundry creditors. Therefore, once the income from sand business was not specifically declared in the return of income, the Ld.CIT(A), in our opinion, was not justified in deleting the same. We accordingly reverse the order of the CIT(A) on this issue and the addition of ₹ 2,10,000/- made by the AO is restored. - Decided against assessee Disallowance of expenses - CIT(A) deleted the addition - Held that - From the assessment order, we find when the AO asked the assessee to produce the details of expenses incurred for truck hiring charges, diesel and petrol expenses, repairs and maintenance expenses, scrap sales, sale of bricks etc. the Authorised Representative of the assessee expressed his inability to furnish the requisite information. The assessee had not provided the various details as called for by the AO during assessment proceedings. Under these circumstances, the CIT(A) in our opinion was not justified in accepting the book results declared by the assessee. We therefore reverse the order of the CIT(A) on this issue and the ground raised by the Revenue is allowed. - Decided in favour of revenue Estimation of income from truck hiring business - Held that - We find admittedly the assessee had declared Nil income in the return filed in response to notice u/s.153A despite declaration of additional income of ₹ 10,00,000/- and another ₹ 4,53,000/- on account of error and omission. Therefore, since the assessee has not maintained proper books of account from truck plying business, the income of the assessee has to be estimated as per provisions of section 44AE. Although the AO has computed such income at ₹ 1,33,000/-, however, the income declared by the assessee at ₹ 12,12,500/- which we are upholding in the subsequent paragraphs will take care of this issue. Therefore no separate addition is called for. - Decided against revenue. Set off of loss from the income offered to tax u/s.132(4) - CIT(A) allowed the set-off - Held that - AO during the course of assessment proceedings observed that in the profit and loss account the assessee has debited petrol and diesel expenses of ₹ 13,84,767/- and repair expenses of ₹ 4,68,000/- against the lorry hiring charges of ₹ 12,71,515/-. The ratio of expenditure as compared to the preceding assessment year was very high. The AO, therefore, held that the assessee cannot incur loss from the truck business. Further, since the assessee was unable to produce bills and vouchers etc., the AO applied the provisions of section 44AE. Since we have upheld the above action of the AO, therefore, we hold that the CIT(A) was not justified in giving set off of loss of ₹ 2,78,533/- from the income offered to tax during the course of search proceedings as additional income. The loss should not have been allowed to be set off by the CIT(A). Therefore, we reverse the finding of the CIT(A) on this issue - Decided in favour of revenue Credit of additional income to the profit and loss account - whether ₹ 12,12,500/- declared by the assessee during the course of search should have been taxed over and above the income determined by the AO? - Held that - We find the assessee in the instant case has not filed his return of income for the impugned assessment year before the search. Although he had declared additional of ₹ 12,12,500/-, however, the assessee has not honoured the same while filing return of income and has declared NIL income by filing profit and loss account in which the additional income has been credited to the profit and loss account and various expenses claimed which assessee could not substantiate. Under these circumstances, the total income of the assessee cannot be less than ₹ 12,12,500/-. We hold and direct accordingly. The ground by the revenue is decided accordingly. Addition on account of suppressed sale of scrap - CIT(A) deleted the addition - Held that - Since during the course of assessment proceedings the assessee was unable to produce the monthly details regarding sales and expenses of scrap business, the AO estimated the scrap sale and determined the profit on reasonable basis. Under these circumstances, we uphold the order of the AO in bringing to tax the amount of ₹ 1,65,559/- on account of suppressed sale of scrap. Ground raised by the Revenue is accordingly allowed. However, since we are holding that the income of the assessee cannot be below ₹ 12,12,500/-, therefore, no separate addition of ₹ 1,65,559/- is required. Addition on account of profit on sale of bricks - Held that - Since no details were produced before the AO during the course of assessment proceedings to substantiate the profit and loss account so prepared, therefore, we uphold the order of the AO on this issue and the order of the CIT(A) is reversed. The ground raised by the Revenue is accordingly allowed. However, since we have held that the income of the assessee cannot be less than ₹ 12,12,500/-, therefore, no separate addition is called for as the same will take care of ₹ 71,313/-.
Issues Involved:
1. Unexplained investment in sand dredging business. 2. Deletion of addition on account of profit from sand business. 3. Acceptance of common family pool fund as a source of investment. 4. Violation of Rule 46A by CIT(A). 5. Rejection of book results by the AO. 6. Estimation of income from truck hiring business. 7. Set off of loss from additional income declared during search. 8. Suppressed sale of scrap. 9. Unexplained payment for sand auction. 10. Profit on sale of bricks. Detailed Analysis: 1. Unexplained Investment in Sand Dredging Business: The AO made an addition of Rs. 35 lakhs as unexplained investment in sand dredging business, questioning the source of funds. The CIT(A) reduced this addition to Rs. 10 lakhs, accepting the assessee's explanation that the funds came from a common family pool sourced from agricultural income. The Tribunal upheld the CIT(A)'s decision, noting the family's ownership of 93 acres of agricultural land and the documented agricultural income. 2. Deletion of Addition on Account of Profit from Sand Business: The AO added Rs. 2,10,000 as profit from sand business, which the CIT(A) deleted, stating it was covered by the undisclosed income of Rs. 14,39,000 offered by the assessee. The Tribunal disagreed with the CIT(A), reinstating the AO's addition, as the income from sand business was not specifically declared in the return. 3. Acceptance of Common Family Pool Fund as a Source of Investment: The CIT(A) accepted the assessee's claim that the investment in the sand business came from a common family pool of agricultural income. The Tribunal found no infirmity in this conclusion, given the detailed agricultural income records and the AO's own acknowledgment of a common source of funds. 4. Violation of Rule 46A by CIT(A): The Revenue argued that the CIT(A) admitted new evidence regarding agricultural income without remanding the matter to the AO, violating Rule 46A. The Tribunal found no substance in this claim, as the assessee had addressed the AO with detailed explanations and supporting documents during the assessment proceedings. 5. Rejection of Book Results by the AO: The AO rejected the assessee's book results due to the inability to produce detailed expense records. The CIT(A) reversed this decision, but the Tribunal upheld the AO's rejection, noting the lack of substantiating evidence for various expenses. 6. Estimation of Income from Truck Hiring Business: The AO estimated the income from the truck hiring business at Rs. 1,33,000 under section 44AE due to inadequate records. The CIT(A) deleted this addition, but the Tribunal upheld the AO's estimation, noting the lack of proper books of account. However, the Tribunal stated that the income declared by the assessee at Rs. 12,12,500 would cover this issue. 7. Set Off of Loss from Additional Income Declared During Search: The CIT(A) allowed the set-off of a loss of Rs. 2,78,533 from the additional income of Rs. 12,12,500 declared during the search. The Tribunal reversed this decision, stating that the loss should not be set off against the additional income declared under section 132(4). 8. Suppressed Sale of Scrap: The AO added Rs. 1,65,559 for suppressed sale of scrap due to the lack of detailed records. The CIT(A) deleted this addition, but the Tribunal upheld the AO's decision, stating that the income of the assessee cannot be less than Rs. 12,12,500, thus negating the need for a separate addition. 9. Unexplained Payment for Sand Auction: The AO added Rs. 3,44,335 as unexplained payment for sand auction. The CIT(A) deleted this addition, accepting the common family pool fund explanation. The Tribunal upheld the CIT(A)'s decision, consistent with their earlier findings on the family's agricultural income. 10. Profit on Sale of Bricks: The AO added Rs. 71,313 as profit from the sale of bricks, which the CIT(A) deleted. The Tribunal reversed the CIT(A)'s decision, reinstating the AO's addition but noted that the overall income of the assessee should not be less than Rs. 12,12,500, covering this addition. Conclusion: The Tribunal partly allowed the Revenue's appeals, upholding some of the AO's additions while maintaining the CIT(A)'s decisions on other points. The overall income of the assessee was determined to be not less than Rs. 12,12,500 for the relevant assessment years.
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