2016 (10) TMI 1276 - AT - Income Tax

Unexplained investment u/s 69 - HELD THAT - The assessee has filed confirmation only on 08.12.2009, which are stereo type letters without PAN thereon. None of creditors is assessed to tax. Details of date money advanced and returned back is not filed nor any interest is charged thereon. It is pertinent to note that these advances were not returned back even after lapse of 4 years. The amount claimed to have been received from 14 creditors is below ₹ 20,000/- which has been intentionally done to escape from receiving the amount by cheques. Even the mode of receiving of amount from Shri Kailash Chand Jain (father) and Smt. Pushpa Jain (mother) ₹ 50,000/- each is also in cash. The onus cast upon the assessee to prove identity, credit worthiness and genuineness of transactions has not been discharged. Thus, these three ingredients of section 68 of the Act are remained unsatisfied. Further the decision in the case of CIT vs. P. Mohanakala 2007 (5) TMI 192 - SUPREME COURT and Sumati Dayal vs. CIT 1995 (3) TMI 3 - SUPREME COURT relied on by the CIT (A) also support the view of lower authorities. In view of these circumstances, the finding of lower authorities are upheld for the addition of and the balance addition is deleted. This grounds of appeal of allowed is therefore, partly allowed. Unexplained investment u/s. 69 in purchase agreement - HELD THAT - Shri Santosh Kumar Lalwani had agreed to purchased 1/3rd of land for ₹ 43,27,400/- and paid ₹ 8 lakhs as advance for the same which means that the total value of the said land must be three times of ₹ 43 lakh meaning there by around ₹ 120-130 lakhs. Therefore, in the same way , Shri Vijay Jain, is very likely might have paid 1/5th of as advance as Bayana at ₹ 120/5 24 lakhs or ₹ 20 lakhs ). Since the assessee has failed to produce the agreement for purchase of land with Shri Devidas others, therefore, we are of the considered view that the lower authorities have justified in making addition of ₹ 20 lakhs on this account. AO has not only made addition based on the statement but also having regards to entire circumstances of the case. The circumstantial evidence and surrounding circumstances make the view of the AO as correct. We also find mentioned that the purchaser (executors) of said agreement have a written agreement of purchase of said land or executor. We find that in the said agreement, it has been clearly mentioned that the assessee has an agreement by which they have authorised to sell the land and get registered the same in name of prospective buyers. In view of these circumstances, we uphold the finding of lower authorities.

Summary

Issues Involved:
1. Addition of ?10,28,000 as unexplained investment under Section 69.
2. Addition of ?20,00,000 as unexplained investment under Section 69 in purchase agreement.

Detailed Analysis:

Issue 1: Addition of ?10,28,000 as Unexplained Investment Under Section 69

The assessee, engaged in the construction business and a director of M/s. Kunjika Construction Pvt. Ltd., did not file his return within the time allowed under Section 139(1) of the Income Tax Act. Consequently, a notice under Section 148 was issued and served. The assessee filed a return declaring a total income of ?96,000, showing income from business and profession under Section 44AD. During the assessment of M/s. Kunjika Construction Pvt. Ltd., the assessee admitted to purchasing shares worth ?35,000 and investing ?44,28,000 in share application money. The source of investment was claimed from own capital/savings, loans from friends and relatives, a loan from Shri Devi Dutta Yeolo, and recovery from opening debtors.

The Assessing Officer (AO) accepted the loan from Shri Devi Dutta Yeolo but found the balance amount of ?10,28,000 unexplained. The AO observed that the assessee deposited and paid cash for the purchase of stamps for property registration, resulting in cash deposits of ?25,13,000. The source of ?10,28,000 was not satisfactorily explained. The AO also added ?4,81,700 deposited in cash in the bank account in the absence of details.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition of ?4,81,700 but confirmed the addition of ?10,28,000, citing the assessee's failure to establish the creditworthiness and genuineness of transactions. Reliance was placed on case laws, including CIT vs. P. Mohanakala and Sumati Dayal vs. CIT, emphasizing the burden on the assessee to prove the nature and source of the sum found credited in the books of account.

The assessee argued that the source of cash deposits was from the opening capital balance and recovery from debtors. However, the AO found discrepancies in the claimed amounts. The Tribunal noted that the assessee failed to produce sundry creditors for examination and the confirmations provided were incomplete. The Tribunal upheld the addition of ?4,75,710 and deleted the balance addition of ?4,75,710, partially allowing the appeal.

Issue 2: Addition of ?20,00,000 as Unexplained Investment Under Section 69 in Purchase Agreement

The assessee claimed that an amount deposited as advance from directors in M/s. Kunjika Construction Pvt. Ltd. was sourced from an advance received from Shri Santosh Kumar Lalwani for an agreement to sell land. The AO recorded the statement of Shri Santosh Kumar Lalwani, who stated that ?20,00,000 was paid by the assessee and another individual to Shri Devidas and others as a token for the purchase of land. The AO noted that the assessee failed to produce the agreement executed with Shri Devidas and others and did not explain the source of the ?20,00,000 payment, leading to the addition.

The CIT(A) upheld the addition, noting inconsistencies in the assessee's claims and the failure to provide documentary evidence. The CIT(A) emphasized that no one would pay such a large amount based on an oral agreement and found the affidavits submitted by the assessee to be self-serving and afterthoughts.

The Tribunal found that the assessee's contention of an oral agreement and payment of only ?51,000 as advance was not supported by evidence. The Tribunal noted that the assessee failed to produce Shri Devidas for examination and did not comment on the statement of Shri Santosh Kumar Lalwani during assessment proceedings. The Tribunal upheld the addition of ?20,00,000, agreeing with the lower authorities' findings and the circumstantial evidence supporting the AO's view.

Conclusion:

The appeal was partly allowed, with the Tribunal upholding the addition of ?4,75,710 and deleting the balance addition of ?4,75,710 regarding the first issue, and dismissing the appeal concerning the second issue, thereby confirming the addition of ?20,00,000.