2022 (1) TMI 1328 - AT - Income Tax

Unexplained investment made in the land - seized document itself proves that the assessee had made investment in the purchase of land - CIT-A deleted the addition - HELD THAT - Cash was received by the assessee from director which would have been utilized for the payment against purchase of land. This presumption also gets strength from the fact that assessee was not having any source of income until July 2013. Further the assessee time and again contended that the cash was paid out of cash received from the directors and directors have offered the cash income in their individual returns. Therefore considering the fact in totality we are of the view that amount of Rs. 1.98 crore and 1 crore paid in the A.Y. 2012-13 and 2013-14 are made out of the cash received from directors. Hence the source of investment in the hand of the assesse gets explained and no addition can be made in hand of the assessee as it is not the income of the assesse. If at all any addition of cash income is required to be made, that can be made in the individual capacity of the director. Indeed the addition of cash investment has been made in hand of Shri Pravinchandra Patel and therefore, no addition in the present case is warranted. Thus the ground of appeal of the assessee allowed. Addition being unexplained expenses on basis of seized paper - Whether entire unaccounted receipt should be added or only the profit element after adjusting the expenses against such unaccounted receipt should be added as income in the hands of the assessee? - HELD THAT - There is no dispute to the fact that the land was acquired by the assessee dated 12th January 2012 and its commercial activities were commenced from July 2013. In other words, there was no activity carried out by the assessee in the year under consideration. Thus the question arises can there be any addition for the unexplained expenditure incurred by the assessee on account of undisclosed income. In the present case, there cannot be any possibility for the assessee for having any unaccounted income in its hands for the year under consideration. It is for the reason that the assessee has not done any commercial activity suggesting that the assessee has earned income which was not disclosed in the books of accounts. If any addition was at all liable to be made, the same could have been done in the hands of the directors of the company. It is for the reason that there were directors who were found to have invested money on behalf of the assessee out of their undisclosed income. Thus, it can be inferred that the directors of the company have incurred the expenses on behalf of the company. As such, the assessee cannot be made subject to addition on account of unexplained expenditure in the year under consideration. As we have adjudicated the issue raised by the assessee after applying the concept of telescoping, we refrain ourselves from adjudicating the other questions recorded hereinabove for the purpose of the decision. Thus the ground of appeal of the assessee is partly allowed. Disallowance of the depreciation on account of excess value of the building - statement furnished on oath under section 131 of the Act that the contractor has raised the bills at the higher value and the payment was accordingly made to the contractor at the higher value which was received back in cash by the assessee - HELD THAT - It seems that the conclusion has been drawn by the revenue solely based on the statement furnished during the assessment proceedings. We find that the CBDT in instruction no 286/2/2003-IT(Inv.II)has instructed the revenue authority to make addition in search proceeding only in the basis of material found instead of mere admission. Admittedly, the information gathered during the search proceedings can be vital piece of input/material but the same cannot substitute the evidence. It was expected by the revenue to carry out necessary investigation based on the seized document and the statement obtained during the search proceedings to find out the truth after conducting the enquiries from the contractors. But no enquiry from the 3rd party has been conducted by the revenue. Accordingly, we are not inclined to uphold the finding of the authorities below. Thus we set aside the finding of the learned CIT(A) with the direction to the AO to allow the claim of the assessee for the depreciation - Hence the ground of appeal of the assessee is allowed. Unexplained cash credit u/s 68 - lack of creditworthiness of the parties - HELD THAT - The assessee has discharged its onus by furnishing the necessary details such as a copy of PAN, bank details, and ITR etc. in support of identity of the parties, genuineness of transaction and creditworthiness of the parties. Admittedly the AO has accepted the identity and genuineness of transaction but doubted the credit worthiness of the parties. However the learned CIT(A) held that the assessee has discharged the primary onus cast under section 68 of the Act and onus shifted on the AO to prove otherwise based on contrary materials on record. Third condition, i.e. creditworthiness of the parties, regarding this we note that the assessee has refunded the amount through banking channel to all the parties.The repayment of the loan amount by the assessee was duly accepted by the Revenue. Thus there remains no doubt that the transaction of the advance received by the assessee from the parties was genuine. In our considered view, once the assessee is able to prove that the money received by it was returned in the subsequent assessment year in the account of the party, then there remains no doubt that the advances received by the assessee were unexplained cash credit. Similarly, we also note that the assessee in respect of all the parties out of the parties as discussed above has furnished the sufficient documentary pieces of evidence including the details of the income of the parties. Therefore in our considered view, the assessee has discharged its onus imposed under section 68. - Decided in favour of assessee. Assessment u/s 153A - disallowance of deduction under Chapter VI-A - Whether no incriminating material was found during search for A.Y,2009-10 and hence the proceeding for A.Y.2009-10 remained unabated? - HELD THAT -There was no incriminating document found/seized during the search proceedings and therefore the concluded/unabated assessment years cannot be disturbed. Assessee was the man of means and capable of making the investments. The assessee in support of his contention has also filed the cash flow statement i.e. showing the source of money invested in the impugned property. It was submitted by the assessee that the investment was made out of the drawing from the bank and this contention of the assessee was not controverted by the learned DR appearing for the Revenue at the time of hearing. In view of the above and after considering the facts in totality, we do not find any reason to interfere in the finding of the learned CIT-A and thus we uphold the same. Thus the grounds of appeal of the revenue are dismissed. Addition u/s 50C - difference in sale consideration and stamp value under section 50C - HELD THAT - The proceedings before us are special proceeding under section 153A and assessment is also unabated/completed. Therefore, addition can only be restricted to the extent of incriminating material found during search as discussed above. As there was no material found in search suggesting that the assessee has received any amount over and above what have been already disclosed by the assessee in the income tax return, we are also of the view that the AIR information cannot be held as incriminating material as there is no evidence that assessee has received excess sale consideration. Therefore, the addition under section 50C in A.Y. 2012-13 being unabated/completed assessment also cannot be sustained. Thus the grounds of appeal of the Revenue are dismissed. Unexplained investment was made on substantive basis in the hands of M/s Neotech Education Foundation and protective basis in the hands of directors - HELD THAT - Once the addition on substantive basis representing the investment in cash by the another director namely Shri Pravin C Patel has been made by us in the AY 2014-15, there cannot be any other addition either in the hands of M/s Neotech Education Foundation or other directors on substantive/protective basis. Payment of ₹ 1 and 1.98 crores represents the application of the income added in the hands of Shri Pravin Patel. As such, the investment of Rs. 1 crores and 1.98 crores has been made out of the addition made in the hands of Shri Pravin Patel for Rs.3,97,37,485/. Thus if any addition is sustained in the hands of any other party, that would lead to the double addition which is not desirable under the provisions of law - Decided in favour of assessee. Treating the agriculture income as income from other sources - HELD THAT - Admittedly, if the assessee is showing the agricultural income, then it is the onus upon him to produce the necessary evidences to justify such income. Indeed, the assessee has furnished the certificate from the Gram Panchayat. But to our considered view such certificate cannot replace the primary documents such as the details for the cultivation of the crop, details of the sales and the expenses incurred for the production of the crop. Such certificate is secondary piece of evidence. Considering the size of the agricultural land and interest of justice and fair play we are of the view that justice will be served to the revenue and the assessee if 50% of the total agriculture income is treated as income from the agricultural activity and the remaining 50% is treated as income from other sources in the given facts and circumstances. Hence the ground of appeal of the assessee is partly allowed. Unexplained cash credit - HELD THAT - Assessee failed to discharge the onus imposed upon him under the provisions of section 68 of the Act. Hence, we are not inclined to interfere in the order of learned CIT-A. Unexplained loans/investments in M/s Neotech Education foundation - HELD THAT - In the absence of necessary information, we can safely presume that this income was earned by the assessee over the period of time which was invested in M/s Neotech Education Foundation over the period. We are presuming so for the reason that there is no other information available on record except that the cash income was invested in M/s Neotech Education Foundation. After considering the facts in totality, we direct the AO to allow the adjustments against the addition made by him for the investment in cash in M/s Neotech Education Foundation - The adjustment is subject to verification. Effectively, if the availability of cash is found based on the documentary evidence, there cannot be addition of any income in the hands of the assessee. Hence the ground of appeal of the assessee is partly allowed in terms of the above. Payment from the unaccounted sources for the purchase of the property along with his wife - share of the assessee was 50% in such investment of land - HELD THAT - It was the onus upon the revenue to establish based on cogent material that the payment has been made by the assessee from some other sources. But the revenue has not brought anything on record. Moreover, we also note that there is a confirmation from the side of the vendor that he has not received the full payment from the assessee, rather he has accepted to have received postdate cheque for the dispute arose in the impugned land. Confirmation of the vendor cannot be brushed aside until and unless other documentary evidences are brought on record. In view of the above we do not incline to uphold the finding of the authorities below. Accordingly we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Unexplained investment - AR before us submitted that the payment of Rs.5.11 Lacs was paid to the banking channel and therefore no addition is warranted - HELD THAT - We note that the assessee failed to provide the details of bank or cheque from where fund was transferred. Indeed, the primary onus lies upon the assessee to produce the necessary evidences in support of amount paid. The assessee was afforded enough opportunities to bring the necessary details on record during the assessment and remand proceedings.Thus, in view of the above we hold that the assessee failed to discharge the onus imposed upon him under the provisions of section 69B of the Act. Hence, we are not inclined to interfere in the order of learned CIT-A., thus the ground of appeal of the assessee is dismissed. Deposits in the ICICI bank account of the assessee - HELD THAT - The revenue has not brought anything on record suggesting that the loan party was having any taxable income in India. Thus in the absence of return of income in the given facts and circumstances no adverse inference can be drawn against the assessee. Furthermore, the assessee has produced the bank statement of the party maintained with ICICI bank, Vadodra wherein sufficient balance was available for advancing loan to the assessee. Thus, the identity and the genuineness of transactions viz a viz the creditworthiness is established from the impugned statement. Thus, there cannot be any addition to the total income of the assessee merely on the reasoning that the assessee failed to file the confirmation and the ITR of the loan party. Deposits in the HDFC Bank account of the assessee - Once the assessee has discharged the onus by furnishing the necessary details then the onus is shifted upon the revenue to reject the submission of the assessee based on the cogent reasons. But we note that the AO failed to exercise the powers conferred under the provisions of section 133(6)/131 of the Act by issuing notices upon the loan parties for taking the confirmation. The learned DR at the time of hearing has also not brought anything on record contrary to the finding of the learned CIT-A. Hence, we do not find any reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the Revenue is hereby dismissed.

Summary

Issues Involved:
1. Validity of reopening under section 147/148.
2. Addition of unexplained investment under section 69B.
3. Addition of unexplained expenditure under section 69C.
4. Telescoping/offsetting of unexplained expenses/investment.
5. Unexplained credits under section 68.
6. Treatment of agricultural income.
7. Disallowance under section 40(a)(ia).
8. Disallowance of depreciation.
9. Procedural aspects of protective and substantive assessments.

Detailed Analysis:

1. Validity of Reopening under Section 147/148:
The first issue raised by the assessee was the validity of the reopening under section 147/148. The assessee's representative submitted that this ground was not pressed, and accordingly, it was dismissed as not pressed.

2. Addition of Unexplained Investment under Section 69B:
The main contention revolved around the addition of Rs. 1.98 crores and Rs. 1 crore as unexplained investment in land for the assessment years 2012-13 and 2013-14, respectively. The Tribunal noted that the assessee had disclosed cash income in the form of brokerage amounting to Rs. 3.21 crores, which was available for investment. The Tribunal held that the source of investment in the hands of the assessee to the tune of Rs. 2.98 crores was explained, and no addition could be made in the hands of the assessee as it was not the assessee's income. Consequently, the addition was deleted.

3. Addition of Unexplained Expenditure under Section 69C:
For the assessment year 2012-13, the Tribunal dealt with the addition of Rs. 39.12 lakhs as unexplained expenditure. The Tribunal observed that the assessee had not commenced any commercial activity until July 2013 and had no source of unaccounted income. Thus, the addition was deleted.

4. Telescoping/Offsetting of Unexplained Expenses/Investment:
The Tribunal applied the principle of telescoping, allowing the set-off of unexplained expenses against the unaccounted income disclosed by the assessee. The Tribunal held that only the net result of the receipts and expenses should be considered for the purpose of additions and allowed the set-off of Rs. 3.21 crores and Rs. 81 lakhs against the addition of Rs. 3.97 crores.

5. Unexplained Credits under Section 68:
The Tribunal dealt with various additions under section 68 for different assessment years. It was held that the assessee had discharged the primary onus by furnishing necessary details such as PAN, confirmation, and bank statements. The Tribunal deleted the additions where the assessee had provided sufficient evidence and upheld the additions where the assessee failed to discharge the onus.

6. Treatment of Agricultural Income:
The Tribunal dealt with the addition of agricultural income treated as income from other sources. It was observed that the assessee had substantial agricultural land and had declared agricultural income. The Tribunal allowed 50% of the declared agricultural income as genuine and treated the remaining 50% as income from other sources.

7. Disallowance under Section 40(a)(ia):
The issue of disallowance under section 40(a)(ia) was dismissed as not pressed by the assessee.

8. Disallowance of Depreciation:
The Tribunal dealt with the disallowance of depreciation of Rs. 7 lakhs. It was observed that the seized document did not conclusively prove that the assessee had claimed excessive depreciation. The Tribunal allowed the claim of depreciation.

9. Procedural Aspects of Protective and Substantive Assessments:
The Tribunal addressed the issue of protective and substantive assessments. It was held that once the addition on substantive basis was made in the hands of one party, the same addition could not be made on a protective basis in the hands of another party, to avoid double taxation.

Conclusion:
The Tribunal provided a comprehensive analysis of each issue, applying relevant legal principles and precedents. The appeals were partly allowed or dismissed based on the merits of each case, ensuring that the assessments were fair and in accordance with the law.