2016 (4) TMI 1045 - AT - Income Tax

Addition u/s 69 - Held that - Assessee has enough funds to repay the sundry creditors to the extent of ₹ 11.63 lakhs. Therefore, we are of the view that assessee has already submitted the confirmations from the creditors and they are from the small farmer community and the assessee is hailing from a small village and moreover no involvement of bank. In our view, the assessee has already established the genuineness of the creditors and the transaction may be under scrutiny due to the fact that in villages, funds are settled in cash. Since it is a small village and involvement of small farmers, we are inclined to accept the submissions of the assessee in this regard. Accordingly, we delete the addition made on this count With regard to advance received for sale of land of ₹ 6.5 lakhs, the assessee has submitted agreement for sale executed in favour of Smt. Y. Nalini, who is stated to be residing in USA. We are not in a position to accept the genuineness of the transaction as the assessee has claimed to have received ₹ 6.5 lakhs and also continue to hold the land. There is no evidence to show that the above land was transferred or the money taken as advance is returned. Also in the sale agreement clause, it was stated that it is agreed between the parties that the balance sale consideration shall be paid within three years from the date mentioned above or at the time of registration whichever is earlier and also that if the purchaser fails to pay the agreed balance payment on or before agreed period, the vendor is agreed to repay 6 lakhs by retaining ₹ 50,000 towards termination of this sale agreement. We have not come across any refund or cancellation of this agreement to show that the transaction is genuine, hence, we reject the claim of the assessee on this count. Past rental income and house hold savings - Held that - CIT(A) could have allowed the balance of ₹ 3.2 lakhs also as the assessee was in the possession of residential property from 1983 onwards i.e. for a period of 19 years and on an average, five portions of the house property were on lease, therefore, assessee could have made the savings to the extent of ₹ 6.2 lakhs over this period. Hence, we delete the total addition of ₹ 6.2 lakhs. Past salary savings - Held that - The assessee had not brought any cogent materials before us to prove that he had made the above savings out of the salary income. The assessee also had to meet the domestic expenses. As per records, the only reported income was salary. In our considered view, it is not possible to make savings to that extent of ₹ 8.80 lakhs. The CIT(A) had properly considered the addition and we sustain the findings of the CIT(A). Addition of GPF amount - Held that - CIT(A) categorically held that the assessee received the GPF amount on 05/05/2003 relevant to AY 2004-05 and hence the same was not available for AY 2003-04. We, therefore, reject the submissions of assessee and confirm the action of the CIT(A). Addition towards unexplained expenditure u/s 69 C - Held that - Assessee has not brought anything on record to show that any additional income to cover payment of interest to bank. Therefore, we confirm the action of the CIT(A) in sustaining the addition made by the Assessing Officer.

Summary

Issues Involved:

1. Unexplained investment under Section 69 of the Income-tax Act, 1961.
2. Unexplained expenditure for repayment of interest on bank loan under Section 69C of the Income-tax Act, 1961.
3. Acceptance of various sources of funds claimed by the assessee for investment.

Detailed Analysis:

1. Unexplained Investment under Section 69:

The assessee filed her return for AY 2003-04 declaring a loss and agricultural income. The Assessing Officer (AO) determined the total income at Rs. 40,86,260, including Rs. 39,04,888 as unexplained investment under Section 69. The investment was for constructing a warehouse under the 'Grameen Bhandar Yozana' Scheme. The AO questioned the sources of funds, and the assessee's explanations were partially accepted by the CIT(A), who sustained Rs. 30,53,170 of the additions.

The Tribunal considered various claims:
- Sundry creditors: The Tribunal accepted the assessee's claim, noting confirmations from 38 small creditors and subsequent settlements, thus deleting the addition of Rs. 18,13,000.
- Advance for sale of plot: The Tribunal rejected the claim of Rs. 6,50,000 due to lack of evidence of the transaction's genuineness.
- Past rental income and household savings: The Tribunal allowed the entire claim of Rs. 6,20,000, considering the long-term rental income.
- Gift: The Tribunal accepted the gift of Rs. 75,000 from the assessee's brother as genuine.

2. Unexplained Expenditure under Section 69C:

The AO made an addition of Rs. 1,89,330 towards unexplained expenditure for repayment of interest on a bank loan. The CIT(A) sustained this addition. The Tribunal confirmed the CIT(A)'s decision, as the assessee did not provide evidence of additional income to cover the interest payment.

3. Acceptance of Various Sources of Funds:

The assessee claimed multiple sources for the investment, including agricultural income, tailoring receipts, past rental income, gifts, advance on sale of a plot, and hand loans. The CIT(A) accepted some claims and rejected others. The Tribunal reviewed each source:
- Tailoring income and agricultural income were accepted.
- Part of past rental income and household savings was accepted.
- Gifts from Sri K. Suryanarayana and Sri D. Rammohan Rao were partially accepted.
- Advance on sale of a plot and hand loans were partially accepted.

Separate Appeal (ITA No. 1620/Hyd/2011):

In a related appeal filed on behalf of the assessee's late husband, the AO made similar additions of Rs. 38,39,337 as unexplained investment and Rs. 1,75,995 as unexplained expenditure. The CIT(A) sustained part of the additions and confirmed the unexplained expenditure.

The Tribunal's decisions included:
- Past salary savings: The Tribunal upheld the CIT(A)'s allowance of Rs. 4,30,000 out of the claimed Rs. 8,80,000.
- GPF amount: The Tribunal confirmed the CIT(A)'s rejection, as the amount was received in the subsequent assessment year.
- Sundry creditors: The Tribunal deleted the addition of Rs. 18,28,337, consistent with the earlier appeal.
- Unexplained expenditure: The Tribunal confirmed the addition of Rs. 1,75,995 due to lack of evidence for additional income.

Conclusion:

Both appeals were partly allowed, with the Tribunal providing detailed justifications for each decision based on the evidence and circumstances presented. The judgment emphasized the need for proper documentation and credible evidence to substantiate claims of investments and expenditures.