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2016 (11) TMI 1233 - AT - Income TaxCommission income earned in cheque discounting activity- Held that - AO has been emphasizing that he called for information from the bank disclosing that the assessee has made transaction, but the assessee has been refuting this information of the AO. The information is not available on the record. The assessee has challenged the AO as well as took a specific plea before the CIT(A). But the AO is silent in his remand report. Therefore, we deem it appropriate to set aside this issue to the file of the AO for re-verification and re-adjudication. The ld.AO shall provide copy of the bank statement exhibiting the turnover between January 2008 to 30th September, 2008. If the transaction is there, in these accounts, then he will be at liberty to make addition of commission income at the rate of 0.1%. But if there is no transaction in these accounts, as alleged by the assessee, then, there would not be any income on account of commission income earned in cheque discounting activity. This ground of appeal is allowed. Addition on business income - Held that - There is no evidence with the Revenue to conclude that the assessee was doing business in textile. The AO has assumed business only on the basis of availability of two seals. To our mind it is too hypothetical. In spite of survey, the Department was not able to lay its hand on any incriminating material indicating that active business was conducted by the assessee in retailed trading of textile items. The AO has simply assumed that since two seals are available, and assessee has shown income for two years earlier, therefore, he should have income in this year also. This observation is not based on any material. If this type of thump rule is being upheld, then there will be no end, therefore, we allow this ground and delete the addition. Unexplained investment shown as receivable - Held that - The copy of the balance sheet is available at page no.91 of the paper book. The major amount in this loose paper is a sum of ₹ 7,81,100/-. According to the assessee, this amount was receivable from one Shri Suresbhai Nareshbhai. The assessee had entered into agreement for sale of flat at Rivera Towers. Copy of the agreement to sell was filed before the AO. This flat has been shown by the assessee in fixed assets in the balance sheet. The ld.AO has never tried to verify the facts in this connection. If it was sale proceeds, which was to be received by the assessee, then how it could be an unexplained investment at the end of the assessee ? The flat was with the assessee and has been reflected in the books, which was agreed to be sold to Shri Sureshbhai and token money was taken by the assessee. Similarly, the assessee has explained each and every entry and how these have duly been accounted in the books. They cannot be treated as unexplained investment at the end of the assessee. We allow this ground and delete this addition. Addition u/s 68 - Held that - Evidence possessed by the Revenue is the loose paper in coded word. As far as loose paper is concerned, there is no dispute about this fact. The dispute is, what inference one could draw from the page. For drawing inference, we have three statements and nature of assessee s business plus evidence produced during assessment i.e. confirmation etc. As far as statement of the assessee dated 6.3.2009 is concerned, it was only a corroborative statement, because, it was taken without oath. In rest of two statements, the assessee has explained his position with more clarity. If it was a loan, then it must have been reflected in some of the transactions either at asset side along with liability. No such things were found. Therefore, in our opinion, the explanation given by the assessee, which is after 13 days of survey is a plausible one, it cannot be brushed aside without giving any specific reasons. The amount cannot be treated as loan taken by the assessee. We allow this ground of appeal and delete addition. Unexplained investment - Held that - AO did not examine the issue with the angle assessee has given explanation. According to the assessee he has a capital balance of ₹ 30,88,195/-. Under the current assets, he has shown advance for property at Ratan Astha of ₹ 2,50,000/-. The AO has treated this amount as unexplained investment on the ground that on the date of survey the assessee failed to produce books and failed to explain this investment as accounted for in the books. The survey was conducted on 6.3.2009. The account ought to be closed on 31.3.2009. It was not necessary for the assessee to complete entries upto 6.3.2009. Thus, the AO ought to have examined this aspect from the books of accounts when the assessee has produced. The assessee has also pointed out that he is an old assessee. Even in the Asstt.Year 2007-08 assessment was framed under section 143(3) r.w.s. 147. This assessment was made on 26.12.2011 i.e. after the survey. Thus, it cannot be said that the investment was not recorded in the books, and therefore, it is an unexplained one Unenvestments made through other persons - Held that - he shares will not be available in physical form in the name of the assessee. Had the shares were available there, then, the assessee could have taken plea that these are not in his name. Thus, once the details of investment was found and the assessee has admitted the investment through other persons, then he cannot take such type of plea. As far as addition on merit is concerned, the AO has made addition on the ground that books were written upto 31.3.2008, and therefore, these investments are unexplained one. The assessee has contended that he has duly accounted these investments. These are reflected in the balance sheet. He has been filing regular return. Conclusion drawn by the AO that investment was made out of books is not sustainable. Therefore, the AO was not justified to treat the investment, which has duly been accounted in the books as out of books and explained one
Issues Involved:
1. Evidentiary value of statements recorded under section 133A. 2. Addition on account of difference in cheque discounting income. 3. Addition on account of net profit on textile trading business. 4. Addition on account of unexplained investment shown as receivables. 5. Addition under section 68 on account of unexplained cash credit. 6. Addition on account of unexplained investment. 7. Addition on account of unexplained investment in shares. 8. Non-grant of telescoping benefit for overlapping addition. Issue-wise Detailed Analysis: 1. Evidentiary Value of Statements Recorded under Section 133A: The primary issue was whether statements recorded under section 133A during a survey have evidentiary value. The Tribunal noted that statements recorded during a survey under section 133A do not have evidentiary value as they are not taken on oath. This is based on precedents from the Hon’ble Supreme Court and various High Courts, which held that such statements are merely information and cannot be used as substantive evidence. The Tribunal emphasized that statements taken under section 131, which are on oath, have more weight. 2. Addition on Account of Difference in Cheque Discounting Income: The AO added ?2,17,995 due to discrepancies in cheque discounting income. The assessee contended that the bank accounts in question were closed and the information provided by the AO was not shared with them. The Tribunal remanded the issue back to the AO for re-verification, instructing the AO to provide the bank statements and verify the transactions. If transactions are found, the AO can make the addition; otherwise, no addition should be made. 3. Addition on Account of Net Profit on Textile Trading Business: The AO added ?15,08,836 assuming the assessee continued textile trading based on the presence of seals of two textile firms. The Tribunal found no evidence of active business in textile trading during the relevant year and noted that the AO’s assumption was speculative. The addition was deleted as it was not supported by any material evidence. 4. Addition on Account of Unexplained Investment Shown as Receivables: The AO added ?12,86,833 based on loose papers found during the survey, which listed amounts receivable from various persons. The assessee provided explanations and ledger accounts showing these were loans and advances. The Tribunal found the explanations plausible and noted that the major amount was related to the sale of a flat, which was reflected in the books. The addition was deleted. 5. Addition under Section 68 on Account of Unexplained Cash Credit: The AO added ?67,75,000 as unexplained cash credit based on a coded entry found during the survey. The assessee explained it was related to cheque discounting business, supported by statements on oath and an affidavit from a third party. The Tribunal found the explanation plausible and noted the lack of evidence to prove it was a loan. The addition was deleted. 6. Addition on Account of Unexplained Investment: The AO added ?2,50,000 as unexplained investment based on a diary entry found during the survey. The assessee explained it was an advance for property, which was reflected in the balance sheet. The Tribunal noted that the investment was disclosed in the books and the AO did not verify the books properly. The addition was deleted. 7. Addition on Account of Unexplained Investment in Shares: The AO added ?11,40,920 based on entries in a writing pad found during the survey, which the assessee admitted were investments in shares through other persons. The Tribunal found that these investments were recorded in the books and reflected in the balance sheet. The AO’s conclusion that the investments were out of books was not sustainable. The addition was deleted. 8. Non-grant of Telescoping Benefit for Overlapping Addition: The Tribunal did not explicitly address the issue of telescoping benefit as the additions themselves were deleted or remanded for re-verification. Conclusion: The Tribunal allowed the appeal partly for statistical purposes, remanding some issues for re-verification and deleting others based on the explanations and evidence provided by the assessee. The judgment emphasized the importance of proper verification and the limited evidentiary value of statements recorded under section 133A.
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