2009 (1) TMI 944 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 6,92,760/- on account of unverifiable construction expenses.
2. Deletion of addition of Rs. 11,00,000/- under Section 68 on account of unexplained deposits.
3. Deletion of addition of Rs. 6,65,000/- under Section 68 on account of unexplained gifts.
4. Sustaining the addition of Rs. 10,00,000/- treating the gift received by the assessee's son as not genuine.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 6,92,760/- on Account of Unverifiable Construction Expenses:
The Revenue challenged the deletion of disallowance of Rs. 6,92,760/- made by the Assessing Officer (AO) due to unverifiable construction expenses. The AO disallowed 50% of the construction expenses claimed by the assessee due to lack of supporting evidence. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the assessee had shown a net profit of Rs. 51,300/- on sales of Rs. 4,60,000/-, resulting in a profit rate of 12%, which was reasonable. The CIT(A) deleted the disallowance, stating that if books of account were not maintained, the profit rate could be estimated, and the profit rate of 12% was reasonable. The Tribunal upheld the CIT(A)'s decision, noting that the construction was not complete, and a profit rate of 12% had been accepted in the immediately preceding year. The Tribunal found no justification for the AO's disallowance and rejected the Revenue's grounds on this issue.

2. Deletion of Addition of Rs. 11,00,000/- under Section 68 on Account of Unexplained Deposits:
The AO made an addition of Rs. 11,00,000/- under Section 68 due to unexplained deposits in the name of M/s. Maheshwari Electronics. The CIT(A) found that the depositor had appeared before the AO during remand proceedings and admitted to making the deposit out of the sale proceeds of his property. The CIT(A) held that the genuineness of the credit was established and deleted the addition. The Tribunal noted that the bank account of the creditor and the sale deeds revealed a direct nexus between the payments and the sale proceeds of the property. The Tribunal upheld the CIT(A)'s decision, finding no basis to interfere with the well-reasoned decision and rejected the Revenue's grounds on this issue.

3. Deletion of Addition of Rs. 6,65,000/- under Section 68 on Account of Unexplained Gifts:
The AO added Rs. 6,65,000/- as income under Section 68 due to unexplained gifts allegedly taken by the assessee from his brother, Ved Prakash Kapoor. The CIT(A) found that the gift was genuine, received by cheque, and the donor was assessed to tax with sufficient creditworthiness. The CIT(A) noted a direct nexus between the rent and security receipts and the payment of the gift. The Tribunal upheld the CIT(A)'s decision, stating that the essentials of a valid gift were satisfied, and the donor had sufficient means to make the gift. The Tribunal found no merit in the Revenue's grounds and rejected them.

4. Sustaining the Addition of Rs. 10,00,000/- Treating the Gift Received by the Assessee's Son as Not Genuine:
The AO added Rs. 10,00,000/- as income under Section 68, treating the gift received by the assessee's son from Sanjiv Kumar Dagar as not genuine. The CIT(A) sustained the addition, finding that the donor was not related to the assessee, there was no occasion for the gift, and the source of the gift was not satisfactorily explained. The Tribunal upheld the CIT(A)'s decision, agreeing that the explanation offered by the assessee was not satisfactory, and the transaction of the alleged gift was not genuine. The Tribunal rejected the grounds raised by the assessee in their appeal.

Conclusion:
The Tribunal dismissed both the appeals of the assessee and the Revenue, upholding the decisions of the CIT(A) on all issues. The Tribunal found that the CIT(A) had correctly appreciated the facts and circumstances of the case, and no interference was warranted in the well-reasoned decisions.