2017 (9) TMI 817 - AT - Income Tax

Addition on estimated business income - estimation of higher income - CIT-A deleted addition - Held that - No interference is called for in the matter. The A.O. has not given any reason for estimating the higher income of assessee. The findings of the A.O. are not corroborated by any evidence or material on record. Therefore, on mere estimation, enhancement of income, is without any basis. Accordingly, the Ld. CIT(A) correctly deleted the addition - Decided against revenue Unexplained cash deposit in bank - proof of creditworthiness of Shri Devender Sharma from whom advance has been shown - Held that - The assessee filed copy of the sale agreement dated 20.04.2011 (PB-49) between assessee and Shri Devender Sharma through which ₹ 10 lakhs was received by assessee in cash as advance against sale of the property. PB-52 is the copy of the bank account of the purchaser Shri Devender Sharma which shows that on 13th April, 2011, he has withdrawn cash of ₹ 12 lakhs from his bank account. Thus, the assessee has been able to prove that he received advance against sale of property and thus, proved the identity of the purchaser and his creditworthiness because he has withdrawn the amount in cash from his bank prior to entering into an agreement to sale with the assessee. - Decided against revenue Addtion u/s 68 - proof of creditworthiness of Shri Sanjay Tyagi for giving loan of ₹ 18 lakhs to the assessee through banking channel - Held that - The assessee filed copy of the confirmation of the creditor in the paper book at page-32 in which it is confirmed by Shri Sanjay Tyagi for giving loan of ₹ 18 lakhs to the assessee through banking channel, which is supported by the copy of the bank statement. The assessee also filed copy of the bank account of Smt. Javitri Devi to show that she has given ₹ 1 crore to Shri Sanjay Tyagi. Therefore, the assessee proved all the ingredients of Section 68 of the I.T. Act in the matter. Ld. CIT(A) noted that this addition is made by the A.O. without giving opportunity to the assessee. This finding of fact has not been disputed through any evidence or material on record. When A.O. made this addition without giving opportunity to the assessee to explain credit of ₹ 18 lakhs, this itself is sufficient to delete the addition against the assessee because it violates principles of natural justice - Decided against revenue Addition on account of interest on loan - Held that - No merit in this ground of appeal of the Revenue. PB-25 is Agreement of Sale in favour of assessee and others through which had given the above advance money to the seller. Therefore, A.O. without any justification disallowed the interest.- Decided against revenue Unexplained investment - Held that - No merit in this ground of appeal of the Revenue. The assessee filed copy of the bank statement to show the withdrawals from his bank account prior to the sale deed. Copy of the sale deed is also filed which support the fact that assessee made investment in property out of his own source. Thus, the assessee explained the source of investment in property.- Decided against revenue

Summary

Issues:
1. Addition of estimated business income
2. Unexplained cash deposit in bank
3. Unexplained cash deposits in bank account
4. Interest on loan
5. Unexplained investment

Issue 1: Addition of estimated business income
The Revenue challenged the deletion of an addition of ?2,24,675 on account of estimated business income. The Assessing Officer (A.O.) estimated the net income of the assessee at ?4,32,000 based on certain bank credits and made the addition. The assessee contended that the addition was made on an estimate basis and the A.O. did not provide any concrete evidence to support the higher income estimation. The Commissioner of Income Tax (Appeals) held that the addition was based on surmises and conjectures and deleted the addition. The ITAT upheld the CIT(A)'s decision, stating that the A.O.'s findings lacked corroboration and were without any basis, leading to the dismissal of the Revenue's appeal on this ground.

Issue 2: Unexplained cash deposit in bank
The Revenue challenged the deletion of an addition of ?10 lakhs as an unexplained cash deposit in the bank. The A.O. made the addition as the assessee failed to prove the creditworthiness of the person from whom the advance was received. However, the CIT(A) noted that the advance was against the sale of a property, and the assessee provided evidence to substantiate the transaction and the creditworthiness of the purchaser. The ITAT found that the assessee adequately proved the identity and creditworthiness of the purchaser, leading to the dismissal of the Revenue's appeal on this ground.

Issue 3: Unexplained cash deposits in bank account
The Revenue challenged the deletion of an addition of ?18 lakhs made as unexplained cash deposits in the bank account. The A.O. required the assessee to prove the identity and creditworthiness of the creditor, which the assessee did by providing various documents. The CIT(A) found that the A.O.'s action was unilateral and lacked proper justification, and the assessee successfully demonstrated the genuineness of the transaction and the creditworthiness of the creditor. The ITAT upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.

Issue 4: Interest on loan
The Revenue challenged the deletion of an addition of ?3,27,000 on account of interest on a loan. The A.O. disallowed the interest without justification, as the assessee had paid advance money for the purchase of agricultural land, not a loan. The CIT(A) accepted the assessee's explanation based on the purchase agreement and deleted the addition. The ITAT found no merit in the Revenue's appeal on this ground and dismissed it accordingly.

Issue 5: Unexplained investment
The Revenue challenged the deletion of an addition of ?7,88,000 on account of unexplained investment. The A.O. did not accept the assessee's explanation regarding the source of cash for the investment, leading to the addition. However, the CIT(A) found that there were withdrawals from the assessee's bank account prior to the investment, supporting the source of funds. The ITAT upheld the CIT(A)'s decision, stating that the assessee adequately explained the source of investment, and dismissed the Revenue's appeal on this ground.

In conclusion, the ITAT upheld the decisions of the CIT(A) in deleting the various additions made by the A.O., finding that the assessee had provided sufficient evidence to support the transactions and creditworthiness in each case. As a result, the appeal of the department was dismissed in its entirety.