2016 (5) TMI 1157 - AT - Income Tax

Addition on account of entries found noted during the course of survey - Admission in statement during search - Held that - The additional income offered at 9, 38, 50, 009/- is computed on the basis of a document prepared at the end of the previous year relevant to assessment year under appeal and the loose paper under reference contained the entries prior to the end of the previous year thus the same stood covered in the memoranda state of affairs as at 31.03.2008 and any further addition is not warranted. It is therefore contended by ld. counsel that the Ld. CIT(A) has rightly deleted the addition and thus the order of Ld. CIT(A) deserves to be uphold on this score. - Decided against revenue Adhoc disallowance of expenses - Held that - It is to be borne in mind that department cannot chose both i.e. tax the assessee on enhanced surrendered and further go on adding separate entry one by one on assumptions. The fair course will be to take each entry quantify each and make separate addition for each. It is very unjustified to add the surrender and further add each item this amount to double jeopardy which is not permissible. Looking at the entirety of circumstances and fact that the assessee enhanced his surrender from 3, 50, 42, 961/- to 9, 38, 50, 009/-; the fact that the balance sheet reflects the sum total of his transactions as on 01.04.2008 it is not justifiable to add the totals of both the balance sheets. On verification of both the balance sheets it emerge that the one filed for income tax purposes is part of and incorporated in the one found during the course of survey. Therefore in our considered view the addition of 2, 13, 15, 248/- as excess liabilities has been rightly deleted by ld. CIT(A). His order on this issue is upheld - Decided against revenue Addition of interest income - Held that - Shri Rajendra Ji Was debtor who has squared up his account with the assessee as on 01.04.2008. Ld. DR could not dispel such factual findings. Further it is found that assesee s cash balance as per balance sheet is 18, 20, 852/- and this amount being the interest income of the assessee during the year has been included in this cash balance on the basis of which the surrender has been made. In our considered view the impugned addition of 3, 45, 000/- has been rightly deleted by ld. CIT(A) which order deserves to be upheld - Decided against revenue Surrender of undisclosed income towards investment and expenditure - Held that - As the facts emerge sworn statement of NLA has been duly endorsed by the assessee to the effect that the investment in the impugned property was made by the son NLA a fact which is uncontroverted and clinches the issue in favour of the assessee. There is no material to suggest that investment in this behalf was made by assesssee. During survey proceedings in respect of loose papers including page 5 of Exhibit A-14 assessee son in reply to question No. 18 of the statement categorically stated that these entries related to the purchases of plot of land in his own name for a total consideration of 45, 40, 200/-. In reply to question No. 23 also NLA admitted amount 30, 40, 200/- as his undisclosed investment. In our view without dislodging NLA s clear statement ld. AO made an addition of 32, 43, 730/- in this behalf in the hands of assessee on surmises. There is no merit in sustaining the addition on the basis of AO s vague observation. Since the impugned investment was owned by son by an uncontroverted sworn statement there is no reason to expect assessee to offer or tax it in his hands. Thus there is no substance in inferring or assuming that assessee went back on his statement. In view of these facts and circumstances we hold that revenue has failed to substantiate that undisclosed investment is made by assesse based on any cogent evidence reason or logic.- Decided against revenue

Issues Involved:
1. Addition of ?32,43,730/- as undisclosed investment in property.
2. Deletion of ?2,13,15,248/- on account of excess liabilities.
3. Deletion of ?3,45,000/- on account of unaccounted loans.
4. Deletion of ?31,065/- out of motor car expenses and depreciation on car.
5. Imposition of penalty u/s 271(1)(c) of the Act.

Issue-wise Detailed Analysis:

1. Addition of ?32,43,730/- as Undisclosed Investment in Property:
The assessee contested the addition of ?32,43,730/- made by the AO, alleging it as an undisclosed investment in property in the name of the assessee's son. The Tribunal noted that during the survey, the son admitted the investment in his name and provided a sworn statement. The AO's addition was based on assumptions without refuting the son's statement. The Tribunal concluded that the investment belonged to the son and deleted the addition, stating that the revenue failed to provide cogent evidence against the assessee.

2. Deletion of ?2,13,15,248/- on Account of Excess Liabilities:
The Revenue challenged the deletion of ?2,13,15,248/- by the CIT(A). The Tribunal observed that the balance sheet found during the survey was a combined one, incorporating both accounted and unaccounted transactions. The assessee had already declared additional income based on these entries. The AO's approach of treating both balance sheets separately and making double additions was deemed unjustified. The Tribunal upheld the CIT(A)'s decision to delete the addition, recognizing the balance sheet as a combined one.

3. Deletion of ?3,45,000/- on Account of Unaccounted Loans:
The AO added ?3,45,000/- based on entries in impounded material, assuming coded figures. The Tribunal found that the entries appeared to be interest payments, already included in the cash balance on which the surrender was made. The CIT(A) had deleted the addition, and the Tribunal upheld this decision, noting that the additional income declared by the assessee covered these entries.

4. Deletion of ?31,065/- Out of Motor Car Expenses and Depreciation on Car:
The AO disallowed 20% of motor car expenses and depreciation for personal use. The Tribunal noted that the expenses were fully vouched and incurred for business purposes, and depreciation is a statutory deduction. The CIT(A) had deleted the disallowance, and the Tribunal upheld this decision, finding no evidence of personal use.

5. Imposition of Penalty u/s 271(1)(c) of the Act:
The penalty was imposed based on the addition sustained by the CIT(A). Since the Tribunal deleted the impugned addition, it concluded that no penalty was imposable. The penalty was deleted, and the assessee's appeal in this regard was allowed.

Conclusion:
The Tribunal allowed the assessee's appeals, deleting the additions and penalty, and dismissed the Revenue's appeal, upholding the CIT(A)'s deletions. The order emphasized the importance of cogent evidence and reasonable assumptions in tax assessments.

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