2017 (1) TMI 1043 - AT - Income Tax

Addition as investment in Emmar Hills and Townships - non accepting the assessee s submission that these payments were made from the income in the hands of the company, advances given for the property out of said income as there was no other income for the assessee - Held that - There was no cash at the time of survey and it has been accepted that cash has been received and utilized by the Directors at the time of survey operations. When the same reply was furnished before the CIT(A), he accepted the same and deleted the addition made by the AO by holding that the amount was already offered as additional income in the hands of company and the company has passed the necessary entries showing as advance given to the assessee and hence the sources for the investment was explained as expenditure. Therefore, considering the facts of the case, we do not find any infirmity in the order of the CIT(A) in deleting the addition made by the AO and the same is here by upheld dismissing the grounds raised by the revenue on this issue. - Decided in favour of assessee

Summary

Issues involved:
1. Addition of Rs. 49,50,000 as investment in Emmar Hills Township by the Assessing Officer.
2. Acceptance of explanation by the CIT(A) regarding the source of investment.
3. Justification of the addition made by the Assessing Officer.

Analysis:

1. The Assessing Officer made an addition of Rs. 49,50,000 as an investment in Emmar Hills Township due to discrepancies in the financial statements of the company. The AO opined that the explanation provided by the assessee was unsatisfactory as the transaction was not recorded in accordance with Accounting Standard-5. The burden of proof was on the assessee to establish the nature and source of the investment, which the assessee claimed was made from the income of the company. However, the AO did not conduct further inquiries to disprove the explanation provided by the assessee.

2. The assessee, in appeal before the CIT(A), reiterated that the investment was made from the income of the company, which had been declared during the relevant period. The CIT(A) considered the submissions and observed that the company had already offered the amount as additional income and had passed necessary entries showing the advance given to the assessee. Therefore, the CIT(A) concluded that the sources for the investment were explained adequately as expenditure, leading to the deletion of the addition made by the AO.

3. The revenue, aggrieved by the CIT(A)'s order, raised concerns about the acceptability of the explanation provided by the assessee and the lack of corroborative evidence. However, the Tribunal upheld the CIT(A)'s decision, stating that the explanation provided by the assessee was satisfactory. The Tribunal noted that the company had already treated the amount as additional income and accounted for the advance given to the assessee, thereby justifying the deletion of the addition made by the AO.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the addition of Rs. 49,50,000. The judgment highlighted the importance of adequately explaining the sources of investments and the relevance of company financial statements in determining the legitimacy of transactions.