2016 (7) TMI 166 - AT - Income Tax

Addition as undisclosed income made u/s 68 - Held that - M/s Swaminarayan Enterprise had sufficient cash available in their books of account, which was in turn used to give business advances to the assessee society and, therefore, the sum of ₹ 23,86,030/- should not be treated as unexplained income and, accordingly, we delete the impugned addition made by ld. Assessing Officer and allow the ground of assessee. Addition on unexplained investment u/s.69 - Held that - Additions were made by the assessing Officer on assumption, conjectures and surmises and without bringing any material on record with certainty and conviction that there was an unexplained investment in the land in excess of the price mentioned in the purchase documents and, therefore, we find no reason to interfere with the order of ld. CIT(A)in delting the addition - Decided in favour of assessee

Summary

Issues Involved:

1. Legality of the assessment order under section 153C read with section 153A of the Income Tax Act, 1961.
2. Addition of ?23,86,030 as undisclosed income under section 68 of the Income Tax Act, 1961.
3. Deletion of addition of ?1,91,16,119 as unexplained investment under section 69 of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the assessment order under section 153C read with section 153A of the Income Tax Act, 1961:

The assessee raised grounds challenging the legality of the assessment order under section 153C read with section 153A of the Income Tax Act, 1961, arguing that no incriminating material was found during the search that could justify the initiation of proceedings under section 153C. Additionally, the assessee contended that the notice for initiation of proceedings was issued after a significant time gap from the date of the search. However, these grounds were not pressed by the assessee's representative and were subsequently dismissed by the Tribunal.

2. Addition of ?23,86,030 as undisclosed income under section 68 of the Income Tax Act, 1961:

The assessee argued that the cash receipt of ?23,86,030 should not be treated as unexplained income since the entries were recorded in the regular books of account. The major portion of this amount was received from Swaminarayan Enterprise, which was used for land registration fees and stamp charges. The Tribunal noted that Swaminarayan Enterprise had sufficient cash balance to justify the source of the cash received by the assessee. The Tribunal found that the cash transactions were made in the regular course of business and were properly recorded in the books of accounts of both the assessee and Swaminarayan Enterprise. Consequently, the Tribunal deleted the addition of ?23,86,030 made by the Assessing Officer under section 68, allowing the assessee's ground.

3. Deletion of addition of ?1,91,16,119 as unexplained investment under section 69 of the Income Tax Act, 1961:

The Revenue appealed against the deletion of the addition of ?1,91,16,119 made by the Assessing Officer as unexplained investment under section 69. The Assessing Officer had based this addition on a valuation report for wealth tax purposes, which valued a larger piece of land at ?6,03,02,484 as of 31.3.2002. The Assessing Officer proportionately calculated the value of the land purchased by the assessee and added 10% appreciation, arriving at a total value of ?4,19,88,619. The difference between this value and the purchase consideration of ?2,28,72,500 was treated as unexplained investment.

The Tribunal upheld the decision of the CIT(A), which deleted the addition, noting that the valuation report was for wealth tax purposes and not related to the assessee. The Tribunal emphasized that the purchase consideration was recorded in the regular books of account and accepted by the stamp authorities. No material evidence was found during the search to support the claim of unexplained investment. The Tribunal concluded that the addition was based on assumptions and conjectures without concrete evidence, and therefore, upheld the deletion of the addition by the CIT(A).

Conclusion:

The Tribunal partly allowed the assessee's appeal by deleting the addition of ?23,86,030 under section 68 and dismissed the Revenue's appeal, upholding the deletion of the addition of ?1,91,16,119 under section 69. The assessment order under section 153C read with section 153A was not interfered with as the related grounds were dismissed as not pressed.