2018 (10) TMI 1860 - AT - Income Tax

Addition made on account of low household expenditure - HELD THAT - We find that the authorities below made addition purely on estimation basis. Reasoning given by the authorities below are on the ground that the assessee has 3 school going children therefore it is not possible to maintain the expenditure as claimed by the assessee. As submitted by the assessee that school fee was shown separately in capital account. The total household expenses are shown at 6, 00, 601/-. The family is residing jointly. Therefore it is contended that no addition is called for. We have given our thoughtful consideration to the facts of the present case keeping in view of the facts that fee and other expenditure have been claimed separately. We therefore restrict the disallowance to the extent of 2 lakhs. Rest of the addition is deleted. Ground No.2 of the assessee s appeal is partly allowed. Addition made on account of disallowance of transfer expenses of agricultural land sold - As contended that 50% of the transfer charges was required to be borne by the assessee - HELD THAT - A.O. in the remand report has stated that the signature on the confirmation of stamp vendor Shri Iqbal Khan as submitted do not match with the signature on last page of sale deed as submitted in the paper book. Therefore confirmation is not established to be of Shri Iqbal Khan. In reply to this observation the assessee has stated that the signatures of a person may differ at different times. A.O. did not choose to call Shri Iqbal Khan in order to verify the authenticity of the confirmation. It is also stated that Shri Iqbal Khan has given an affidavit which is enclosed in the paper book at page No.250. We have perused the contents of this affidavit. As per this the deponent of the affidavit Shri Iqbal Khan had admitted to have received money in respect of purchase of stamp papers related to the transaction in question. A.O. ought to have summoned the deponent of the affidavit and examine him. This exercise is not done by the A.O. We therefore set aside the order of the authorities below on this issue and restore this issue to the A.O. to decide afresh to verify the facts of the affidavit of Shri Iqbal Khan by summoning him and making such enquiry which is necessary for verification. This ground of the appeal is allowed for statistical purposes. Disallowing the exemption claimed u/s 54B - HELD THAT - Revenue authority has recorded growing of soyabean and paddy from financial year 2005-06 to 2009-10. This fact is not controverted by the revenue by placing any contrary material on record. Moreover we notice that the Ld. CIT(A) has also observed that intention of the assessee was not for utilising the land for agricultural purposes. We are of the view that where the assessee has demonstrated that it has fulfilled the conditions for availing the benefit of section 54B of the Act intention of the assessee behind purchase and sale is of no consequence. We therefore direct the A.O. allow deduction u/s 54B of the Act as claimed by the assessee and delete the addition. Addition u/s 68 - assessee said that the amount was received from the minor children of 3, 70, 000/-. - HELD THAT - We find that in the remand proceedings the A.O. has categorically stated that these advances were received from the minor children and these amounts pertain to the past savings of the children. The Ld. CIT(A) has not brought on record any adverse material rebutting the finding of the A.O. We therefore direct the A.O. to delete this addition. Disallowance of interest paid to bank and enhancing the interest income on the term loan against fixed deposits - HELD THAT - The assessee claimed interest there on and the same was disallowed by the A.O. on the ground that the assessee had not shown any business income in the computation of income. The Ld. CIT(A) did not adjudicate this ground however enhanced the income. It is stated that the A.O. has confirmed the fact in the remand report. It is also stated that the notice for enhancement was defective as in the notice it was stated that what was the basis of claiming interest expenses of 9, 38, 756/- and not the notice as to why the interest income from Dena Bank was not offered. We find force into the contention of the assessee. The interest income as offered and the expenditure incurred there on was a direct nexus with earning of such income which is allowable u/s 57 of the Act. The factum of offering of income of 9, 31, 084/- is duly admitted by the A.O. in his remand report. The assessee has proved nexus with the expenditure incurred and income earned. Therefore the addition is hereby deleted. Ground No.6 of the assessee s appeal is allowed. Disallowance of agricultural income - HELD THAT - It is prayed that the agricultural income may be estimated. After considering totality of the facts and material on record as the land was sold in Jan 16 and the Pustika of the another land is also placed on record we therefore estimate income at 1 lakh. The assessee gets relief of 1 lakh. A.O. to delete addition of 1 lakh. This ground of the assessee s appeal is partly allowed. Addition on account of not accepting the deposits received from the persons against booking of flat - HELD THAT - We find that the assessee has furnished PAN No. Income tax Returns of the two persons namely Sunil Solanki and Dilip Solanki. The assessee has claimed that the amount so received as advance not as a loan. This fact requires verification by the A.O. We therefore set aside the order of the Ld. CIT(A) on this issue and restore the issue to the file of the A.O. for verification from the persons who had advanced money to the assessee and decide the issue afresh. Addition on non acceptance of gift from mother of the assessee Smt. Kanta Sojatia - HELD THAT - A.O. has also accepted the factum of gift. It is stated that the Ld. CIT(A) has proceeded only on the ground of suspicion. It is stated that there is no evidence to demonstrate that the cash of 15 lakhs was deposited by the assessee. It is further stated that mother of the assessee is a regular income tax payee. The capital of 40, 98, 329/- is duly reflected and disclosed to the department. It is further pointed out that on 5.11.2009 a sum of 9 lakhs was withdrawn from the bank account. Therefore it cannot be inferred that mother of the assessee was not having any source of income. Under these facts we are unable to sustain the finding of the Ld. CIT(A). Further the assessee has demonstrated that balance amount of 2, 78, 522/- standing on the credit balance was also gifted to the assessee and the same was reflected by capital account also. Since the donor is having sufficient source to donate duly assessed to income tax thus the finding of the Ld. CIT(A) is not sustained and the addition made is deleted. Addition on account of interest received but not reflected in the return - HELD THAT - Assessee fairly conceded that this amount was not reflected in the books of accounts. We therefore dismiss this ground of the assessee s appeal. Unexplained cash deposits in bank - HELD THAT - All the transactions of preceding year are recorded in the books of accounts. The books are duly audited. The cash on hand as on 31.3.2009 of 5, 98, 017/-. As per the audited accounts none of the deposit was found to be unaccounted. Section 69 of the Act would apply only when the transaction is not recorded in the books. It is stated that the assessment of assessment year 2009-10 was completed u/s 143(3) of the Act wherein the cash balance was duly accepted. It is also stated that the cash in hand in earlier years was accepted. Ld. D.R. could not rebut this contention of the assessee that in the earlier year cash balance was duly accepted in the assessment proceedings.Therefore the addition as made is deleted. In respect of the addition of 2, 35, 000/- it is pointed out by the assessee that this amount was out of withdrawal during April 2009. Therefore addition made cannot be sustained. Same is hereby deleted. Addition on account of cash deposits in bank - HELD THAT - From the cash flow statement as furnished by the assessee it is clear that the assessee was having cash in hand and cash received from Dainik Prabhat Kiran on sale of agricultural crop and refund of loan etc. to make deposits in the bank. The revenue has not placed any adverse material contradicting the submissions of the assessee. Under these facts the addition cannot be sustained. Hence this ground of assessee s appeal is allowed. Addition on account of agricultural income - HELD THAT - We find that the authorities below made addition purely on estimation basis. We have given our thoughtful consideration to the facts of the present case we restrict the disallowance to the extent of 2 lakhs.

Summary

Issues Involved:
1. Low household withdrawals
2. Transfer expenses of agricultural land sold
3. Disallowance of exemption claimed under section 54B
4. Loan taken from minor children
5. Disallowance of interest paid to bank and enhancement of interest income
6. Disallowance of agricultural income
7. Non-acceptance of deposits received from two persons against flat booking
8. Non-acceptance of gift from mother
9. Interest received from bank
10. Unexplained cash deposit in bank
11. Initiation of penalty under section 271(1)(c)
12. Charging of interest under sections 234B and 234C

Detailed Analysis:

1. Low Household Withdrawals:
The authorities below made an addition on the basis of low household withdrawals, estimating household expenses at ?6,00,000 without any concrete basis. The assessee argued that the total household expenses were shown at ?6,00,601, with school fees and other expenses claimed separately. The Tribunal restricted the disallowance to ?2,00,000 and deleted the rest of the addition.

2. Transfer Expenses of Agricultural Land Sold:
The assessee claimed transfer expenses of ?7,25,000 for the sale of agricultural land, which the authorities disallowed due to lack of evidence. The Tribunal noted that the AO did not verify the affidavit provided by the stamp vendor, Shri Iqbal Khan. The issue was remanded back to the AO for fresh verification.

3. Disallowance of Exemption Claimed Under Section 54B:
The authorities disallowed the exemption under section 54B, claiming the assessee did not carry out agricultural activities. The Tribunal found that the assessee had demonstrated the fulfillment of conditions for section 54B, including growing crops. The Tribunal directed the AO to allow the deduction under section 54B.

4. Loan Taken from Minor Children:
The authorities added ?3,70,000 received from minor children under section 68, claiming the source was unexplained. The Tribunal found that the AO had accepted these advances as past savings of the children in the remand proceedings. The Tribunal directed the AO to delete this addition.

5. Disallowance of Interest Paid to Bank and Enhancement of Interest Income:
The authorities disallowed the interest expenditure of ?9,38,756 and enhanced the interest income by ?5,20,303. The Tribunal noted that the interest expenditure had a direct nexus with the interest income earned from the deposit with Dena Bank. The Tribunal deleted the addition and allowed the interest expenditure under section 57.

6. Disallowance of Agricultural Income:
The authorities disallowed ?2,00,000 claimed as agricultural income. The Tribunal estimated the agricultural income at ?1,00,000 based on the evidence of land and crops and directed the AO to delete the addition of ?1,00,000.

7. Non-Acceptance of Deposits Received from Two Persons Against Flat Booking:
The authorities disallowed ?3,30,000 received as advances for flat booking. The Tribunal noted that the assessee had provided PAN numbers and income tax returns of the depositors. The issue was remanded back to the AO for verification from the persons who advanced the money.

8. Non-Acceptance of Gift from Mother:
The authorities disallowed a gift of ?17,78,552 from the assessee's mother, suspecting the cash deposit before the gift. The Tribunal found that the mother was a regular income tax payer with sufficient capital and the gift was documented. The Tribunal deleted the addition.

9. Interest Received from Bank:
The authorities added ?42,461 as interest received but not reflected in the return. The Tribunal dismissed this ground as the assessee conceded that the amount was not reflected in the books.

10. Unexplained Cash Deposit in Bank:
The authorities added ?17,01,000 as unexplained cash deposits. The Tribunal noted that the opening cash balance and other sources of cash were documented and accepted in previous assessments. The Tribunal deleted the addition.

11. Initiation of Penalty Under Section 271(1)(c):
The Tribunal dismissed this ground as premature.

12. Charging of Interest Under Sections 234B and 234C:
The Tribunal held this ground as consequential in nature.

Conclusion:
The Tribunal provided relief to the assessee on several grounds, remanded some issues back to the AO for verification, and upheld a few additions. The appeal was partly allowed for statistical purposes.