2017 (9) TMI 1864 - AT - Income Tax

Addition on the basis of the so-called agreement said to be found during the course of survey operation - Addition of sum paid to Shri Basheer Ahmed HELD THAT - It cannot be said that the assessee has paid 2.38 Crores to Shri Basheer Ahmed. When Shri Basheer Ahmed denied the fact of receipt of money it cannot be concluded that the assessee has paid 2.38 Crores to Shri Basheer Ahmed. As per the observation made by the lower authorities agreement for sale was for sale of property after disposal of cases pending before Principal Sub-Judge at Trichy. When the matter was pending before the Principal SubJudge for adjudication and the power of attorney who entered into the agreement claimed that he has not received any money this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has paid 2.38 Crores to Shri Basheer Ahmed. The assessment proceeding being a judicial proceeding this Tribunal is of the considered opinion that addition has to be made only on the basis of concrete evidence. Presumption and surmise have no role to play in judicial proceeding. Therefore the addition of 2.38 Crores made by the Assessing Officer as confirmed by the CIT(Appeals) cannot stand for the scrutiny of law. Accordingly the orders of both the authorities below are set aside and the addition Assessment u/s 153A - date of search and seizure operation conducted u/s 132A - HELD THAT - Second proviso to Section 153A of the Act clearly says that the assessment or reassessment if any relating to any assessment year falling within the period of six assessment years is pending on the date of initiation of search under Section 132A of the Act the same shall stand abated. In this case the search proceeding admittedly took place on 18.11.2011. Therefore the assessment proceeding pending as on 18.11.2011 shall stand abated in view of second proviso to Section 153A of the Act. Therefore the assessment order passed by the Assessing Officer under Section 143(3) of the Act cannot stand in the eye of law. In other words the Assessing Officer has to pass an order under Section 153A or 153C of the Act as the case may be. Hence the regular assessment passed by the Assessing Officer has to be quashed. Accordingly the orders of both the authorities below are quashed and the appeal of the assessee allowed Purchase of landed properties - search and seizure operation was conducted under Section 132A - HELD THAT - In the absence of concrete evidence for payment of 2.38 Crores the addition made by the Assessing Officer as confirmed by the CIT(Appeals) cannot stand in the eye of law. Accordingly the orders of both the authorities below are set aside and the addition of 2.38 Crores is deleted. Addition in respect of sundry creditors balances - HELD THAT - During the course of survey operation on 17.11.2009 there were trade creditors to the extent of 2, 08, 76, 976/-. The assessee claimed that a sum of 1, 25, 71, 162/- was settled before hand. However the same was not reflected in the accounts of the assessee. The assessee claimed that loans were obtained from relatives. Since the relationship among the relatives from whom the assessee said to have received loan was estranged he admitted the same for taxation. Even the details of credits were not explained before the AO and the CIT(Appeals). Since the assessee admitted the credit balance which was proportionately added in the hands of the assessee and other three children of the assessee this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition in respect of loan creditors - assessee claimed before the Assessing Officer that the loans were borrowed from close relatives - HELD THAT - Statement reflected loan creditors to the extent of 11, 89, 000/-. The details of creditors were not furnished before the Assessing Officer and the CIT(Appeals). Moreover such details were also not furnished before this Tribunal. When the assessee claims that the loan was borrowed from close relatives it is for the assessee to establish the identity of creditors creditworthiness of creditors and genuineness of the transaction. In the absence of such details to substantiate the claim of loans this Tribunal is of the considered opinion that the Assessing Officer has rightly made addition Assessment u/s 153C - Addition towards drawings - HELD THAT - The provisions of Section 153C of the Act very clearly says that the assessment has to be made on the basis of material found during search operation only the person other than the searched person. In the case before us no material was found during the search operation with regard to personal expenses. The Assessing Officer appears to have estimated the expenditure without any material. The Assessing Officer on the basis of presumption found that the assessee was living in a joint family and not made any drawings therefore he added a sum of 3 lakhs towards personal expenses. This being an assessment proceeding under Section 153C in the absence of any material found during the search operation with regard to personal expenses this Tribunal is of the considered opinion that there cannot be any addition. Moreover when the assessee is found to be in joint family the drawing of the other members of the family is also to be taken into consideration. In the absence of any material found during search the addition of 3 lakhs cannot stand in the eye of law. Unexplained payment - AO found that the assessee has paid a sum of 30 lakhs to each of his three sisters - oral evidence for payment of 30 lakhs to each of the sisters and the registered release deed discloses payment of 10, 50, 000/- which one would prevail? - HELD THAT - This Tribunal is of the considered opinion that the oral statement or evidence cannot override the registered release deed. The registered release deed would prevail over all the oral evidence available on record. Moreover the sisters who were said to be examined under Section 131 of the Act have also filed affidavit denying they have not received 30 lakhs. This affidavit is in conformity with the registered release deed. Therefore this Tribunal is of the considered opinion that the oral statement said to be recorded from the assessee or from sisters of the assessee cannot override the statement contained in the registered release deed and affidavit. Hence the addition made by the Assessing Officer to the extent of 90 lakhs under Section 69C of the Act cannot stand in the eye of law. Accordingly the orders of both the authorities below are set aside and the addition of 90 lakhs is deleted. Payment made to Shri S.A. Kandasamy - during the search operation Revenue authorities found a receipt for the payment made to Shri S.A. Kandasamy - assessee claimed before the Assessing Officer that the payment was part of payment made for Karur land purchase - HELD THAT - The details of payment made for Karur land purchase are available at page 21 of seized material. It is not in dispute that these details do not reflect the payment made to Shri S.A. Kandasamy. When the details contained in the seized material with regard to payment made for Karur land purchase do not reflect the payment made to Shri S.A. Kandasamy this Tribunal is of the considered opinion that the payment was made over and above the details contained in the seized material for the purchase of Karur land hence the same cannot be allowed in the absence of any evidence. Therefore the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Unexplained investment of the assessee in gold jewellery u/s 69A - HELD THAT - The exemption claimed by the assessee under CBDT circular is only for seizure of gold jewellery during the course of search operation. As rightly submitted by the Ld. Departmental Representative it does not absolve the assessee from explaining the source for acquisition of such jewellery. Therefore the CBDT circular would not come to the rescue of the assessee. The assessee is expected to explain the source for acquisition of jewellery found during the course of search operation. Since proper explanation was not offered this Tribunal is of the considered opinion that the Assessing Officer has rightly treated 13, 67, 995/- as unexplained investment of the assessee in gold jewellery under Section 69A of the Act. Therefore this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Unaccounted purchases made outside the books - CIT(Appeals) found that the assessee himself has taken into account the profit on unaccounted sales while calculating the gross profit therefore even the 10% need not be added - HELD THAT - The assessee has taken himself the profit of unaccounted sales while calculating the gross profit. When the profit on unaccounted sales were taken into account for the purpose of calculating the gross profit this Tribunal is of the considered opinion that there is no need for any further addition. Hence the order of the CIT(Appeals) is confirmed and the appeal of the Revenue stands dismissed. Unexplained jewellery under Section 69A - HELD THAT - It is not in dispute that 744.28 gms of jewellery was found and the same was valued at 20, 26, 868/-. The assessee has disclosed unaccounted jewellery to the extent of 18, 42, 693/- in the cash flow statement. The balance of 1, 84, 175/- was added under Section 69A of the Act. The assessee claimed before the Assessing Officer that a married lady is entitled for 500 gms of gold jewellery. This Tribunal is of the considered opinion that 500 gms of gold jewellery for a married lady as per CBDT circular relates to seizure. It does not absolve the responsibility of the assessee from explaining the source of acquisition. In fact the Assessing Officer has given relief in respect of gift / Sridhan jewellery received by the assessee s wife during marriage and also most of the gifts said to be received. The relief given by the Assessing Officer was to the extent of 18, 42, 693/-. The assessee could not explain the source of acquisition of jewellery to the extent of 1, 84, 175/-. Therefore this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Addition under the head Income from business - addition from the profit from KAS Nagar project - assessee claims that the income to the extent of estimation made by the Assessing Officer is very much available for making investment or the income from other sources - HELD THAT - The contention of the Revenue appears to be that the assessee himself disclosed income from KAS Nagar project at 10% of sale value separately. This Tribunal is of the considered opinion that when the additional income was available due to estimation made by the Assessing Officer on KAS Nagar project the same should be telescoped towards addition made under the head Income from Other Sources . Therefore the CIT(Appeals) has rightly directed the Assessing Officer to telescope. Hence this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of ?2.38 Crores based on survey findings.
3. Validity of assessment order post-search operation.
4. Addition of ?27,40,939/- for sundry creditors.
5. Addition of ?11,89,000/- for loan creditors.
6. Addition of ?3,00,000/- for personal expenses.
7. Unexplained payment of ?90 lakhs.
8. Unexplained payment of ?1 lakh to Shri S.A. Kandasamy.
9. Addition of ?13,67,995/- for unexplained gold jewellery.
10. Addition of ?35,15,071/- for unexplained expenditure.
11. Addition of ?1,84,175/- for unexplained jewellery.
12. Telescoping relief of ?32,40,977/-.

Detailed Analysis:

1. Condonation of Delay:
The Tribunal condoned the 4-day delay in filing the appeal by the Revenue, finding sufficient cause for the delay.

2. Addition of ?2.38 Crores:
The Tribunal deleted the addition of ?2.38 Crores made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], noting that the recipient, Shri Basheer Ahmed, denied receiving the money. The Tribunal emphasized that additions must be based on concrete evidence, not presumption or surmise.

3. Validity of Assessment Order Post-Search:
The Tribunal quashed the assessment order passed under Section 143(3) of the Income-tax Act, 1961, for the assessment year 2009-10, holding that the pending assessment proceeding abated upon initiation of the search under Section 132A and should have been completed under Section 153A or 153C.

4. Addition of ?27,40,939/- for Sundry Creditors:
The Tribunal confirmed the addition of ?27,40,939/- made by the AO for sundry creditors, noting that the assessee admitted the credit balance and failed to explain the details of the credits.

5. Addition of ?11,89,000/- for Loan Creditors:
The Tribunal upheld the addition of ?11,89,000/- for loan creditors, as the assessee could not furnish details or substantiate the claim of loans borrowed from close relatives.

6. Addition of ?3,00,000/- for Personal Expenses:
The Tribunal deleted the addition of ?3,00,000/- for personal expenses, stating that in the absence of any material found during the search operation, the AO's estimation based on presumption was not justified.

7. Unexplained Payment of ?90 Lakhs:
The Tribunal deleted the addition of ?90 lakhs, holding that the registered release deed, which disclosed a payment of ?10,50,000/-, prevailed over the unsigned receipt and oral statements.

8. Unexplained Payment of ?1 Lakh to Shri S.A. Kandasamy:
The Tribunal confirmed the addition of ?1 lakh, as the payment was not reflected in the details of the payment made for Karur land purchase and was considered over and above the documented payments.

9. Addition of ?13,67,995/- for Unexplained Gold Jewellery:
The Tribunal upheld the addition of ?13,67,995/-, noting that the CBDT circular for seizure did not absolve the assessee from explaining the source of acquisition of the jewellery.

10. Addition of ?35,15,071/- for Unexplained Expenditure:
The Tribunal confirmed the CIT(A)'s decision to delete the addition of ?35,15,071/- for unexplained expenditure, as the profit on unaccounted sales was already considered in calculating the gross profit.

11. Addition of ?1,84,175/- for Unexplained Jewellery:
The Tribunal upheld the addition of ?1,84,175/-, stating that the CBDT circular did not absolve the assessee from explaining the source of acquisition.

12. Telescoping Relief of ?32,40,977/-:
The Tribunal confirmed the CIT(A)'s decision to allow telescoping of ?32,40,977/- towards addition made under the head "Business income" in respect of income under the head "Other Sources," noting that additional income was available for telescoping.

Conclusion:
The Tribunal allowed the assessee's appeals in I.T.A. No.216/Mds/2013, I.T.A. No.217/Mds/2013, and I.T.A. No.1315/Mds/2016, partly allowed I.T.A. No.1316/Mds/2016 and I.T.A. No.591/Mds/2016, and dismissed I.T.A. No.590/Mds/2016 and I.T.A. No.592/Mds/2016. Both the Revenue's appeals in I.T.A. No.1443/Mds/2016 and I.T.A. No.568/Mds/2016 were dismissed.