2020 (6) TMI 803 - AT - Income Tax

Unexplained loan given - Addition based on the seized paper - HELD THAT - The figure 1998 is mentioned on this page and the Assessing Officer interpreted the same as relatable to this assessment year 1999-2000. Assessing Officer s order is silent on the reasons. These figures could be taken for assessment year 1998-99 too. Thus there exists an ambiguity. Considering the same we are of the opinion that interpreting the figures 1998 as relatable to the A.Y. 1999-2000 is not proper. Assessing Officer and CIT(A) failed to give reasoned order for taxing the entry in this year. The same cannot be taxed in 2000-01 too. Therefore we are of the opinion such additions are not sustainable. Accordingly the ground no.1 raised by the assessee is allowed. Agricultural income - As undisputed fact that the Department Authorities are engaged in the time barred issues. Therefore we are of the considered opinion that grounds no.3 4 and 5 should be remanded to the file of the Assessing Officer for fresh adjudication. The direction to the Assessing Officer shall include that (i) the Assessing Officer shall comply with the calculation related exercise by passing a modification order in the hands of M.N. Navale (Bigger HUF) in the time barred manner and (ii) after due calculating of the said agricultural income and also after following the direction of the Tribunal (supra) the Assessing Officer shall examine the availability of funds and also examine the correctness of the claim of loans of Rs.10, 37, 000/- and a sum of Rs.1, 50, 000/- and also the sources thereof from M.N. Navale (Bigger HUF). The Assessing Officer shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Ownership of the seized papers - Whether seized documents/papers do not belong to the assessee? - HELD THAT - It is not the case of the Revenue that there was any investigation into these papers. No question is raised/asked while recording the statement of the assessee during the search action in this aspect. Therefore considering the incompleteness of the proceedings of the Revenue to these papers in our considered view the addition made by the Assessing Officer appears to be premature. Thus the matter should be travelled to the file of the Assessing Officer for one more round of investigation/recording of statement. It is necessary to establish the relatability/belongingness of the papers to the assessee under consideration. Accordingly the matter is remanded to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Thus the grounds no.1 and 2 are allowed for statistical purposes. Addition on account of difference in rent received relying on a noting found recorded on the loose papers seized during the search and seizure action - HELD THAT - CIT(A) also confirmed the addition made by the Assessing Officer without appreciating all the facts relating to the property. There is no dispute on these facts. The only dispute is with reference to the monthly rent. It is the case of the assessee that at the relevant point of time i.e. A.Y. 2002-03 the property was let out to Sunind Private Limited and the applicability of monthly rent is Rs.30, 000/- only. In the subsequent year 2004 onwards the property is rented to STES with the applicable rent of Rs.75, 000/- and this applicable Rs.75, 000/- is born out of the records. Therefore the addition of Rs.5, 40, 000/- made by the Assessing Officer in the assessment year 2002-03 is not correct. We find the dates and the lease deed are relevant and the rental agreement between the assessee and the STES. This aspect was not raised before the lower authorities as pointed out by the ld. DR for the Revenue. In all fairness therefore we are of the opinion that this issue requires re-verification of facts relating to the date of letting out of property to the assessee and the date of rent to STES in 2004. Considering the fact that the seized paper or lease deed does not contain the date or the year the Assessing Officer is directed to re-verify the same and pass a speaking order after granting reasonable opportunity of being heard to the assessee.

Summary

Issues Involved:
1. Existence of HUF and agricultural income.
2. Unexplained loans and investments.
3. Addition based on seized documents.
4. Treatment of rental income.
5. Enhancement of income by CIT(A).
6. Validity of assessment orders.
7. Wealth Tax assessment.

Issue-wise Detailed Analysis:

1. Existence of HUF and Agricultural Income:
The core issue across multiple appeals was the existence of M.N. Navale (Bigger HUF) and its agricultural income. The Tribunal had previously recognized the existence of agricultural lands and activities in the hands of the HUF. The Tribunal directed the Assessing Officer to verify the availability of funds and agricultural income before making additions related to loans and investments from the HUF. The Tribunal remanded these issues for fresh adjudication, emphasizing the need for a reasoned order from the Assessing Officer.

2. Unexplained Loans and Investments:
Several grounds pertained to the addition of unexplained loans and investments. The Tribunal noted ambiguities in the dates and amounts mentioned in seized documents and found that the Assessing Officer had not provided sufficient reasoning for these additions. The Tribunal allowed some grounds, dismissing others as not pressed, and remanded many issues to the Assessing Officer for fresh adjudication, particularly in light of the HUF's recognized agricultural income.

3. Addition Based on Seized Documents:
The Tribunal addressed multiple instances where additions were made based on entries in seized documents. It was argued that these documents did not belong to the assessee and were considered "dumb documents" without evidential value. The Tribunal found that the Revenue had not sufficiently established the documents' connection to the assessee and remanded these issues for further investigation and proper establishment of ownership.

4. Treatment of Rental Income:
Disputes over the correct rental income were raised, with the assessee arguing that the rental amounts declared were accurate and supported by lease agreements. The Tribunal found that the Assessing Officer had not properly verified these claims and directed a re-examination of the rental agreements and corresponding rental income.

5. Enhancement of Income by CIT(A):
The CIT(A) had enhanced the income in certain cases based on seized documents and other findings. The Tribunal found that these enhancements were not always supported by sufficient evidence and remanded these issues for further verification by the Assessing Officer, particularly concerning the ownership and use of funds related to the HUF.

6. Validity of Assessment Orders:
The assessee challenged the validity of certain assessment orders, arguing that they should have been made under Section 153A due to the search year. The Tribunal dismissed these grounds as academic, focusing instead on the substantive issues raised in the appeals.

7. Wealth Tax Assessment:
In the Wealth Tax appeal, the Tribunal addressed the inclusion of certain properties in the net wealth of the individual assessee. The Tribunal upheld the CWT(A)'s direction to the Assessing Officer to verify the ownership of these properties, considering the existence of the HUF and its assets. The Tribunal emphasized the need for the Assessing Officer to expedite the verification process and resolve pending issues.

Conclusion:
The Tribunal's judgment involved remanding multiple issues to the Assessing Officer for fresh adjudication, particularly concerning the existence and income of the HUF, the ownership of properties, and the proper treatment of loans and investments. The Tribunal emphasized the need for thorough verification and reasoned orders, ensuring that the assessee's claims were properly examined in accordance with the principles of natural justice.