2018 (6) TMI 1562 - AT - Income Tax

Assessment u/s 153A - Held that - Admittedly, the assessee has not been able to show as to where he has disclosed the interest income received on the loans admitted by him to be given to M/s.Kangaroo Impex and Kangaroo Fabrics. This being so, we are of the view that the addition representing the interest in respect of loans given by the assessee to M/s.Kangaroo Impex and Kangaroo Fabrics has been rightly added. Difference in returned income for which the D.R brought our attention to para-8 at page-28 of the assessment order. As a submission that originally, the assessee had filed his return of income for the impugned assessment year declaring an income of ₹ 34,24,530/- on 28.08.2010. Subsedquently, when the return was filed in response to the notice issued u/s.153A, the return filed on 29.06.2016 showed an income of ₹ 14,00,740/-. Thus, the assessee had under-stated his income to the tune of ₹ 20,23,790/-, which has been added by AO and confirmed by CIT(A). We have considered the submissions of the D.R and perused the materials available on record. It is true that the assessee is entitled to disclose the lower income in the subsequent return filed, if he is able to substantiate with reasons as to why he disclosed the lower income. In the present case, the assessee has not given any explanation as to why he is disclosing lower income in the return filed in response to notice issued u/s.153A when compared to the return originally filed by him. This being so, the addition representing the difference between the return originally filed and the return filed in response to the notice u/s.153A of the Act stands confirmed. Undisclosed investment - Held that - A perusal of the assessment order, as also the reply filed by the assessee extract therein, clearly shows that the transactions have been accepted by the assessee and in fact supported by the agreements. The settlement of the creditors is supported by the cash receipts found in the course of search. This has also not been disputed by the assessee. However, the assessee has been unable to show how or from where he has generated the funds to settle these creditors of M/s.Mars Export, the source for the same and whether taxes have been paid on the same, are also not shown. This being so, we find no reason to interfere with the findings of the Ld.CIT(A) or the AO on this issue and the same stands confirmed. Unaccounted investment in Kerala - Held that - The assessee has in response to the same, claims to have taken possession of three of her properties in Kerala, though the assessee claims the possession has not been received by the assessee. The fact remains that the registration of the same has been done in the name of the assessee. The assessee having got the property registered in his name, it is for the assessee to explain how he paid this amount or how he sourced the money for the purchase of the said property. If the property were in the name of a company, then admittedly it could have been said to have been towards the settlement of the embezzlement. Here the property having been registered in the name of assessee as an individual and the embezzlement have been claimed as loss in the hands of the company, we are of the view that the addition has been rightly made in the hands of the assessee.

Summary

Issues Involved:
1. Rental income as undisclosed income.
2. Unaccounted cash loans.
3. Unaccounted investment in Nanjundapuram land.
4. Undisclosed income from loans to M/s.Kangaroo Impex.
5. Undisclosed interest income from loans to M/s.Kangaroo Impex and Kangaroo Fabrics.
6. Difference in returned income.
7. Undisclosed investment relating to M/s.Mars Exports.
8. Protective addition related to embezzlement by erstwhile staff Smt. Dhanalakshmi.
9. Unaccounted sales.

Detailed Analysis:

1. Rental Income as Undisclosed Income:
The Tribunal noted that the properties from which the rental income was derived were claimed to belong to the assessee's parents. The Revenue did not disprove this claim. The Tribunal directed the Assessing Officer (AO) to reassess the rental income in the hands of the respective property owners. The AO must determine the rent attributable to each property owned by the assessee and his parents separately and make additions accordingly.

2. Unaccounted Cash Loans:
The assessee admitted to giving cash loans but failed to explain the source of the cash. The Tribunal upheld the AO's addition of these amounts as undisclosed income, as the source of the cash was not substantiated by the assessee.

3. Unaccounted Investment in Nanjundapuram Land:
The assessee claimed to have received funds from M/s.Mayflower Inno Realty Pvt. Ltd. for aggregating land. The Tribunal directed the AO to re-adjudicate this issue, allowing the assessee to explain the receipt and utilization of funds, including cash flow statements.

4. Undisclosed Income from Loans to M/s.Kangaroo Impex:
The assessee admitted to advancing loans but failed to explain the source of the funds. The Tribunal upheld the AO's addition of these amounts as undisclosed income.

5. Undisclosed Interest Income from Loans to M/s.Kangaroo Impex and Kangaroo Fabrics:
The assessee did not disclose the interest income received from these loans. The Tribunal upheld the addition of this interest income as undisclosed income.

6. Difference in Returned Income:
The assessee filed a lower income in the subsequent return compared to the originally filed return without providing any explanation. The Tribunal upheld the AO's addition of the difference as undisclosed income.

7. Undisclosed Investment Relating to M/s.Mars Exports:
The assessee failed to explain the source of funds used to settle creditors of M/s.Mars Exports. The Tribunal upheld the AO's addition of these amounts as undisclosed income.

8. Protective Addition Related to Embezzlement by Erstwhile Staff Smt. Dhanalakshmi:
The Tribunal noted that the embezzlement occurred in the company, M/s.Millenium Motors, and not in the hands of the assessee. Consequently, the addition made by the AO was deleted.

9. Unaccounted Sales:
The Tribunal found that the sales abstract found in electronic form was a working sheet for bank loan purposes without supporting evidence. The Tribunal deleted the addition made by the AO on this count.

Summary:
The Tribunal allowed some issues for statistical purposes, directing the AO to reassess them, while it upheld other additions made by the AO. The appeals were partly allowed for statistical purposes, except for ITA No.1499/CHNY/2018, which was allowed in full.