2017 (6) TMI 980 - AT - Income Tax

Addition as professional receipts - Held that - As assessee has voluntarily offered to disclose the income due to deficiencies noted during the survey. Revenue authorities have agreed to stop the investigation further by accepting the voluntary disclosure of income. It is the duty of the assessee to disclose the income as agreed with the revenue authorities during survey. Assessee has not brought on record or clarified to the satisfaction of the revenue nor before us the reason for reducing the professional income. In our considered view, the revenue has accepted to drop the investigation proceeding only because assessee has agreed voluntarily to disclose the professional income. Therefore, assessee should have disclosed the income as promised to the revenue authorities, hence, ground raised by the assessee is dismissed. Rental income received - business income or house property - Held that - AO has brought on record clearly that assessee has let out this residential property on rent. Assessee has not brought on record any material to substantiate its claim neither before the revenue authorities nor before us. Hence, the finding that the rental income received by the assessee from the property, which was given on rent is to be treated as income from house property is sustained and this ground is dismissed. Unexplained capital gain - sale of property - difference on sale consideration - Held that - The assessee has sold the property under consideration for the value less than the value for which he entered into agreement to sell with another person. The reason for selling lesser value and reason for cancellation was not brought on record by the assessee. Citing the above reasons, the AO brought to tax the difference amount as unexplained income. We fail to understand the logic of bringing the difference amount as unexplained income. The addition is on the difference of amount in sale consideration. If at all, AO could have increased the sale consideration to tax and calculated capital gains. However, in our opinion, only provision in the income tax to bring the difference of sale consideration is section 50C. In the given case, the value of SRO and sale consideration are matching, there is no room for the AO to bring the presumed difference on sale consideration to tax. The AO should have brought some cogent material to substantiate his stance rather than presumption Claim u/s 54F - denial of claim on the ground that the consideration was not utilized for acquiring new asset/the assessee failed to utilize the amount of sale consideration received for purchasing new asset - AO found that the assessee purchased the house property by availing bank loan instead of applying the sale consideration for the above purpose - Held that - We are not in a position to accept the views of the AO considering the fact that the assessee need not have to utilise the sale consideration in the new property. It is enough that the assessee procures the new property within the stipulated time provided in section 54F to claim the exemption. How the property purchased by the assessee is irrelevant.

Issues Involved:
1. Addition of ?3,36,485 as professional receipts.
2. Treatment of rental income from Karimnagar property as house property income.
3. Addition of ?55,00,000 as unexplained income from a cancelled agreement.
4. Addition of ?22,78,814 as unsecured loans.
5. Addition of ?23,21,220 as advance for sale of flats.
6. Disallowance of claim under Section 54F.

Issue-wise Detailed Analysis:

1. Addition of ?3,36,485 as Professional Receipts:
The AO added ?3,36,485 to the assessee's income, noting discrepancies between the declared income during the survey and the filed returns. The CIT(A) upheld this addition, stating that the assessee failed to provide a satisfactory explanation. The tribunal agreed, emphasizing the assessee's obligation to disclose the income as agreed during the survey. Thus, the ground raised by the assessee was dismissed.

2. Treatment of Rental Income from Karimnagar Property as House Property Income:
The AO treated the rental income from the Karimnagar property as house property income under Section 24 of the Income Tax Act, 1961, rather than business income. The CIT(A) upheld this, noting that the property was let out, and depreciation could not be claimed as it was not used for business purposes. The tribunal sustained this finding, dismissing the assessee's claim that the rental income should be treated as business income.

3. Addition of ?55,00,000 as Unexplained Income from a Cancelled Agreement:
The AO added ?55,00,000 as unexplained income, based on a discrepancy between the agreed sale price of a plot and the actual sale price. The CIT(A) upheld this addition, noting the lack of evidence for the alleged dispute over the property. However, the tribunal disagreed, stating that the AO's addition was based on assumptions without substantial evidence. The tribunal allowed this ground, noting that Section 50C was the only applicable provision for such discrepancies, and it was not invoked here.

4. Addition of ?22,78,814 as Unsecured Loans:
The AO added ?22,78,814 as unexplained unsecured loans due to the assessee's failure to provide details. The CIT(A) upheld this, noting the assessee's continued failure to provide evidence even at the appellate level. The tribunal admitted additional evidence submitted by the assessee and remitted the issue back to the AO for examination, allowing this ground for statistical purposes.

5. Addition of ?23,21,220 as Advance for Sale of Flats:
Similar to the unsecured loans, the AO added ?23,21,220 as unexplained credits due to lack of evidence. The CIT(A) upheld this addition. The tribunal, admitting additional evidence, remitted this issue back to the AO for further examination, allowing this ground for statistical purposes.

6. Disallowance of Claim under Section 54F:
The AO disallowed the assessee's claim of ?23,75,946 under Section 54F, arguing that the sale consideration was not used to acquire a new asset. The tribunal disagreed, stating that the law only required the procurement of a new property within the stipulated time, regardless of how it was financed. The tribunal cited several precedents supporting this view and allowed the assessee's claim.

Conclusion:
The tribunal partly allowed the appeal for statistical purposes, remitting issues related to unsecured loans and advance for sale of flats back to the AO for further examination, while dismissing the grounds related to professional receipts and rental income, and allowing the claim under Section 54F.

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