2018 (1) TMI 1519 - AT - Income Tax

Admitting of the additional evidences by the CIT(A) in violation of Rule 46A - HELD THAT - CIT(A) never admitted any additional evidences which requires remanding to the AO s file. It is merely a letter evidencing the existence of books of accounts in the possession of the AO. When the books of accounts are undisputedly lying with the AO for months, the assessing officer cannot allege that the books of accounts were not furnished by the assessee on this issue of addition of ₹ 4,35,741/-, we find the Ld.CIT(A) granted relief on the basis of the binding judgment of jurisdictional Hon ble High Court. Similar is the case with other additions deleted by the CIT(A). From this point of view, the contravention of the provisions of section 46A of the I.T. Rules, 1962 is not raised on correct facts. Revenue could not demonstrate, atleast one crucial document which goes to the root of the matter admitted by the CIT(A) at the back of the AO and without calling for remand report, if any. Therefore, grounds raised by the Revenue in this appeal have no merit. Since the Revenue fail on this legal issue, all the said grounds raised by the revenue have to be dismissed. Addition on account of Foreign Travel Expenses - CIT-A deleted the addition - CIT(A) gave part relief to the assessee - HELD THAT - We find the reasoning given by the CIT(A) in his order is a well reasoned one. The amount of ₹ 10,000/- considered by the CIT(A) on account of hotel expenditure, as having sponsored by the insurance company needs no interference. It is also a fact that AO made the addition only on estimation basis. Disallowance of interest expenditure - AO made addition as the amount which was paid by the assessee as interest on his borrowed loans - HELD THAT - CIT(A) noted since the assessee has only shown total income of ₹ 3,20,000/-, the CIT(A) was of the opinion that only ₹ 2,00,000/- should be considered as working capital and accordingly, computed the interest paid on borrowings at ₹ 13,89,872/- on pro-rata basis which works out to ₹ 1,60,560/-. Thus, ₹ 1,19,818/- is upheld. We find the conclusion given by the CIT(A) after taking into cognizance the capital account and balance sheet of the assessee is fair and reasonable and does not call for any interference. As such, we do not find any violation of provisions of section 46A of the Income Tax Rules, 1962. Ground No.3 raised by the revenue is therefore dismissed. Undisclosed investment in properties - HELD THAT - The property in question was purchased prior to the period of search and the AO made the addition on presumption basis. CIT(A) has appreciated the issue in the right perspective and deleted the addition. Thus, on merits, we find the order of CIT(A) is fair and reasonable Regarding the additional evidence addition made by the Ld. AO. is unjustified and the Ld. CIT (A) is justified in deleting the said addition. Since, the purchase deed was produced before the Ld. AO. during the course of assessment proceedings, the question of calling for the remand report simply does not arise. Further I am enclosing herewith the copy of submission filed with the Ld. AO. wherein it is clearly stated that the Purchase deed of the said land was submitted in the paper book. Foreign Travel expenses disallowed - AO disallowed the said expenses incurred by the assessee in connection with his travel to Singapore and Mauritius for want of details and the source of funds - HELD THAT - As discussed in AY 2006-07 while dealing with similar addition, the sponsor Hero Motors had clearly mentioned that tickets have to be borne by the dealer. The appellant also denied of travelling of their sons to Mauritius and Singapore but did not furnish copy of their passport to support the claim. In the circumstances, the fact of travelling to Singapore and Mauritius has been brought by the AO on the record and for want of further details, he was left with no other option but to estimate the expenditure. However, AO had failed to give credit to the amount of ₹ 79,000/- debited the capital account of the appellant. Therefore, addition to the extent of ₹ 79,000/- is deleted and balance addition of ₹ 1,73,000/- is upheld. Grounds raised by the appellant is partly allowed Accrual of income - addition of interest income on account of undisclosed income from FDR - HELD THAT - Proper opportunity could not be granted to the appellant, and the AO without examining the computation of total income filed by the appellant along with the return of income filed on 08-08-2008 had assumed that interest on FDR kept with the UCO Bank was not offered to tax. As examined the computation of total income and it is seen that appellant has offered interest of ₹ 5,807/- as interest on FDR with the UCO Bank. Therefore, estimated addition of ₹ 6,000/- made on this ground stands deleted Disallowance of interest expenditure - HELD THAT - CIT(A) correctly held that the disallowance of interest is uncalled for considering the assessee s own funds and the jurisdictional High Court judgment in the case of RELIANCE UTILITIES POWER LTD. 2009 (1) TMI 4 - BOMBAY HIGH COURT Estimation of net profit @6% - HELD THAT - Having considered the fact that AO was in possession of the books and there was no material with the AO to disturb the concluded assessment. CIT(A) also examined the letter received from the AO that the assessee produced books of account before him. Further, relying on the judgment of Hon ble Bombay High Court in the case of Murli Agro Products, 2010 (10) TMI 1052 - BOMBAY HIGH COURT . CIT(A) deleted the entire addition. We have already dealt with the same issue while dealing with the issue of violation of Rule 46A of the I.T. Rules, 1962 - Considering reasoned finding of the CIT(A) on this issue, we uphold the order of CIT(A). As such, revenue has no reason for making addition Addition on account of income from other sources (being 50% of the disclosed agricultural income) - Assessment u/s 153A - HELD THAT - AO made the addition on estimation basis and there was no incriminating material gathered during the course of search. Therefore, we find the order of CIT(A) in deleting the addition is reasonable. Thus, we uphold the order of CIT(A) and the ground No.4 raised by the revenue is dismissed. Unrecorded advance receipt on account of sale of property to Shri Ashok Vijaykumar Kotecha (M/s. Chaudhari Motors) - addition deleted by the CIT(A) admitting additional evidence - HELD THAT - No iota of fault in the reasoning given by the CIT(A) deleting the addition of ₹ 1 crore. While deleting the addition, CIT(A) has considered all aspects; (1) Saudi pawtis dated 11-10- 2010 and 14-10-2010 (2) cancellation document (3) statement given by the assessee u/s.132(4) (4) confirmation of Shri Anil Kotecha cancelling the original transaction in response to the show cause notice issued by the AO. All these documents clearly suggest that the amount of ₹ 1 crore was returned back to Shri Anil Kotecha. Regarding the revenue s allegation that the CIT(A) admitted certain additional evidences, we find that no specific document was specified by the Ld. DR for the Revenue before us which constitutes additional evidence. Regarding Sauda Pawti and the deed of cancellation, we find they exist in the files of the AO. Therefore, there is no violation of Rule 46A of the Income Tax Rules, 1962 in this regard Addition of short term capital gains - CIT-A deleted the addition - HELD THAT - As find from the discussion of the CIT(A) reveal that ₹ 68,46,000/- is not the value as per the records of stamp duty authorities. The value of ₹ 68,46,000/- is the figure as per the registered valuer which is created for loan purpose and hence, it has no sanctity under the provisions of section 50C of the Act. It is the finding of CIT(A) that there is no evidence to demonstrate that the assessee received higher consideration than that of ₹ 29,63,800/-. On the facts of this case, we are of the opinion that addition of ₹ 38,82,200/- is unwarranted. Ground No.3 raised by the revenue is accordingly dismissed. Addition on account of interest of purchase of land - addition deleted by the CIT(A) - HELD THAT - It is evident that the loan is actually squared up by 01-04-2010 relevant to A.Y. 2011-12. No interest is accrued in principle due to the said squaring up of the loan. Notwithstanding the same, assessee has a strong capital base to the tune of ₹ 1.09 crores and the presumption laid down by the jurisdictional High Court in the case of Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT that no funds are utilized for payments towards investment in the land. Considering the above discussion given by the CIT(A) while deleting the addition, we find the order of CIT(A) is a well reasoned one and therefore, it does not call for any interference.

Summary

Issues Involved:
1. Admitting additional evidence under Rule 46A.
2. Deletion of foreign tour expenses.
3. Deletion of disallowance of interest expenditure.
4. Deletion of addition on account of undisclosed investment in properties.
5. Deletion of addition on account of undisclosed interest in FDR.
6. Deletion of addition on account of unproved agricultural income.
7. Deletion of addition on account of estimation of net profit.
8. Deletion of addition on account of unrecorded advance receipts.
9. Deletion of addition on account of short-term capital gains.
10. Deletion of addition on account of disallowance of interest on purchase of land.

Detailed Analysis:

1. Admitting Additional Evidence under Rule 46A:
The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A of the Income Tax Rules, 1962. The Tribunal found that the CIT(A) did not admit any additional evidence that required a remand report from the AO. The documents in question were already in possession of the AO, and the CIT(A) merely considered written submissions and existing records, thereby not violating Rule 46A.

2. Deletion of Foreign Tour Expenses:
The AO disallowed foreign tour expenses due to lack of supporting documents. The CIT(A) allowed partial relief based on a letter from Hero Motorcorp Ltd. confirming sponsorship of hotel expenses. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on estimation and the CIT(A) had provided a well-reasoned order.

3. Deletion of Disallowance of Interest Expenditure:
The AO disallowed interest expenditure due to lack of substantiation. The CIT(A) provided partial relief after considering the balance sheet and capital account, and the Tribunal upheld this decision. The Tribunal found no violation of Rule 46A as the balance sheet was part of the records during the assessment proceedings.

4. Deletion of Addition on Account of Undisclosed Investment in Properties:
The AO added undisclosed investment based on a valuation report. The CIT(A) deleted the addition, noting that the property was purchased in FY 1998-99, and no new evidence was found during the search. The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was based on presumption without concrete evidence.

5. Deletion of Addition on Account of Undisclosed Interest in FDR:
The AO added interest income on FDR, assuming it was not offered to tax. The CIT(A) deleted the addition after verifying that the interest was already included in the income returned by the assessee. The Tribunal upheld this decision, confirming that the addition was unwarranted.

6. Deletion of Addition on Account of Unproved Agricultural Income:
The AO added agricultural income on an estimated basis. The CIT(A) deleted the addition, noting that no material was gathered during the search to dispute the declared income. The Tribunal upheld the CIT(A)'s decision, finding the addition to be based on estimation without supporting evidence.

7. Deletion of Addition on Account of Estimation of Net Profit:
The AO estimated net profit at 6% due to non-production of books of account. The CIT(A) deleted the addition, noting that the books were audited and in the AO's possession. The Tribunal upheld this decision, agreeing that the AO had no basis to reject the audited results.

8. Deletion of Addition on Account of Unrecorded Advance Receipts:
The AO added ?1 crore as unrecorded advance receipts from a land sale. The CIT(A) deleted the addition after verifying sauda pawtis and cancellation documents. The Tribunal upheld the CIT(A)'s decision, finding no evidence that the amount was not returned.

9. Deletion of Addition on Account of Short-Term Capital Gains:
The AO added short-term capital gains based on a valuation report for loan purposes. The CIT(A) deleted the addition, noting that the valuation report was not relevant for section 50C and there was no evidence of higher consideration received. The Tribunal upheld this decision.

10. Deletion of Addition on Account of Disallowance of Interest on Purchase of Land:
The AO disallowed interest on loan taken for land purchase. The CIT(A) deleted the addition, noting that the loan was squared up and the assessee had sufficient interest-free funds. The Tribunal upheld this decision, relying on the jurisdictional High Court's precedent.

Conclusion:
All six appeals filed by the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on all grounds. The Tribunal found no violations of Rule 46A and agreed with the CIT(A)'s well-reasoned orders based on existing records and legal precedents.