2018 (1) TMI 1502 - AT - Income Tax

Addition u/s 68 - assessee borrowed sum from Shri Subair Khan NRI brother of Mr. Nizar Ahmed - as submitted that the said amount was paid by Shri Subir Khan towards booking 1000 sq. ft. space in the building called Killi Towers under construction at that time - HELD THAT - The details of repayment of loan was not filed before the lower authorities and they had no occasion to examine the details. Further the assessee has taken two different stand one before the CIT(A) and another before the Assessing Officer. Hence it is appropriate to remit the issue back to the file of the Assessing Officer to examine the same afresh in accordance with law. Accordingly we remit the issue to the file of the Assessing Officer for his fresh consideration and decide the same after giving opportunity of hearing to the assessee. Thus the appeal filed by the assessee is partly allowed for statistical purposes. Unexplained capital contribution by the partners - addition u/s 68 - search operation u/s. 132 - survey u/s. 133A at the office of the assessee s auditor - CIT(A) deleted the same by observing that the balance sheet and income and expenditure filed subsequent to the survey cannot be relied upon and no addition could be made on account of capital contribution brought in by the partners - HELD THAT - The balance sheet filed subsequent to the survey needs to be verified which has not been verified either by the Assessing Officer or by the CIT(A). Hence in the interest of justice we remit the disputed issue to the file of the Assessing Officer for fresh consideration and decide the issue in accordance with law after giving reasonable opportunity of hearing to the assessee.

Summary

Issues Involved:

1. Sustenance of addition of ?15 lakhs availed from Shri Subair Khan.
2. Deletion of addition made by the Assessing Officer on account of unexplained capital contribution by the partners.

Issue-wise Detailed Analysis:

1. Sustenance of Addition of ?15 Lakhs Availed from Shri Subair Khan:

The assessee contested the addition of ?15 lakhs borrowed from Shri Subair Khan, an NRI, which was made by the Assessing Officer under Section 68 of the Income Tax Act due to the absence of a proper explanation. The assessee argued that Shri Subair Khan had passed away in 2009, making it impossible to obtain a confirmation letter. The amount was purportedly paid towards booking space in a building under construction, supported by a deed of agreement dated 06.02.2007. However, the CIT(A) observed inconsistencies in the assessee's explanations and confirmed the addition, noting several reasons including the appellant's contradictory stands, the factual inaccuracy of the construction business claim, discrepancies in signatures, and the cash nature of the transaction.

The assessee further submitted repayment details of ?10 lakhs to Smt. Nabeesa Khan, wife of Shri Subair Khan, via cheques, and a confirmation letter signed by his mother and brother. The Revenue objected, stating these details were not presented before the lower authorities. The Tribunal noted that these repayment details were indeed not examined by the lower authorities and remitted the issue back to the Assessing Officer for fresh consideration, allowing the appeal partly for statistical purposes.

2. Deletion of Addition Made by the Assessing Officer on Account of Unexplained Capital Contribution by the Partners:

Following a search operation and subsequent survey, discrepancies were found in the balance sheets for the assessment years 2005-06 and 2006-07. The Assessing Officer made additions under Section 68 for unexplained capital contributions by the partners, based on balance sheets found during the survey. The CIT(A) deleted these additions, stating that the balance sheets found at the auditor's office could not be relied upon for making such additions. The CIT(A) highlighted several points, including the fact that the balance sheets were incomplete, unaudited, and not found at the search location or the appellant's office. The CIT(A) also noted that the audited balance sheets filed in response to notices under Section 148 should be considered, which showed no fresh capital contributions by the partners.

The Revenue appealed, arguing that the assessments were made under Section 144 due to non-cooperation by the assessee, and the balance sheets signed by the managing partner were valid for assessment purposes. The Tribunal, noting the need for verification of the balance sheets filed subsequent to the survey, remitted the issue back to the Assessing Officer for fresh consideration. Consequently, the issue raised in the Cross Objection by the assessee regarding the enhancement of addition by the CIT(A) without a hearing was also remitted for fresh consideration.

Conclusion:

The Tribunal remitted both issues back to the Assessing Officer for fresh consideration and decision in accordance with the law, after giving reasonable opportunity of hearing to the assessee. The appeals filed by the Revenue, the appeal filed by the assessee, and the Cross Objection filed by the assessee were partly allowed for statistical purposes. The judgment was pronounced in the open court on 29th January 2018.