2017 (4) TMI 1185 - AT - Income Tax

Unexplained cash payment - Addition relied on statement and figures mentioned in the seized document found during the course of search - Held that - It is seen that against the figure of ₹ 35 lakhs, cheque amounts have been mentioned and so the break up amounts have also been mentioned on the back side of the seized documents which is also verifiable from the bank statements/books of accounts. On further perusal of ledger a/c submitted by the Ld AR it is also seen that the amount of ₹ 35 lacs was given by the assessee to M/s Megha Realmart Pvt Ltd. by cheque which is evident from the copy of ledger account of the assessee in the books of M/s Megha Realmart Pvt. Ltd. The Assessee has jgiven ₹ 35 lacs to M/s Megha Realmart Pvt Ltd. on 20.01.2011 by cheque out of which ₹ 25 lacs is transferred to his loan account and ₹ 10 lacs was adjusted against the share capital issued to the assessee. It is also a fact that for making this addition, AO has simply relied on the sworn statement only. To corroborate his findings, AO has also not brought on record any evidence to prove that assessee had made cash payment of ₹ 35 lacs instead of payment of payment by cheque as claimed by the assessee. - Decided against revenue Unexplained investment in silver articles - AO noted and accepted the assessee s explanation that gifts of silver articles during social functions and occasions of birth of children etc are customary in Indian families - Held that - It is not in dispute that these silver items especially given the nature of these items in terms of coin, trays, utencils, etc are generally given as gifts on various social and other family occasions/functions. However, in terms of reasonableness of such gifts which can be given or accepted, there cannot be any straight jacket formula. It all depends upon the facts and circumstances of each case. The onus is on the assessee to come out with the plausible explanation in this regard as the silver articles have been found in his possession. However, in absence of the same, the AO taking into consideration the social and financial standing of the family has arrived at 50% which we find just and proper. In light of above, the additions made by the AO is sustained and the order of the ld CIT(A) is set aside. - Decided against the assessee.

Summary

Issues Involved:
1. Deletion of addition of ?35,00,000/- claimed by Revenue as unexplained cash investment.
2. Restriction of addition on account of unexplained investment in silver articles from ?2,43,515/- to ?1,50,000/- and cross objection by the assessee against this addition.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?35,00,000/-:
The primary issue concerns whether the ?35,00,000/- noted in a seized document was given in cash or by cheque to M/s Megha Realmart Pvt. Ltd. During the search operation, the assessee initially stated that he invested ?35,00,000/- in cash in the Megha Realmart Project. However, during the assessment proceedings, the assessee clarified that this amount was given by cheque and provided documentary evidence, including ledger accounts and bank statements, to support this claim. The AO did not accept this explanation, considering it an afterthought since the assessee did not retract his earlier statement until the assessment proceedings. The CIT(A) deleted the addition after examining the evidence, noting that the ledger account and bank statements corroborated the assessee's claim of payment by cheque. The Tribunal upheld the CIT(A)'s decision, emphasizing that the addition cannot be sustained solely based on the statement without corroborating evidence. The Tribunal confirmed that the ?35,00,000/- was indeed given by cheque, not in cash, and dismissed the Revenue's appeal on this ground.

2. Restriction of Addition on Unexplained Investment in Silver Articles:
During the search, 8.620 kg of silver articles were found. The AO initially accepted the explanation for gold ornaments but treated 50% of the silver articles as unexplained, making an addition of ?2,43,515/-. The CIT(A) reduced this addition to ?1,50,000/-. The assessee argued that the entire quantity of silver articles was reasonable and customary for the family, and no evidence of purchase was found during the search. The Tribunal noted that the AO had reasonably attributed 50% of the silver articles to customary gifts based on the family's social and financial standing. The Tribunal found this approach just and proper, setting aside the CIT(A)'s reduction and reinstating the AO's original addition of ?2,43,515/-. Thus, the Tribunal allowed the Revenue's appeal on this ground and dismissed the assessee's cross objection.

Conclusion:
The Tribunal upheld the CIT(A)'s deletion of the ?35,00,000/- addition, confirming it was paid by cheque. However, it reinstated the AO's original addition of ?2,43,515/- for unexplained investment in silver articles, finding the AO's reasoning reasonable and justified. The Revenue's appeal was partly allowed, and the assessee's cross objection was dismissed.