2017 (10) TMI 1089 - AT - Income Tax

Unexplained immovable properties - unaccounted production and sale of products, suppressing of profits , generating unaccounted income, ploughing back their unaccounted income into the books by way of manoeuvring bogus/artificial share transactions and also claiming benefit of tax at a lower rate - Assessment proceedings u/s 153A - CIT(A) deleted the addition on account of investment holding that the payments for the properties in question are made by cheque and these were paid by family members in whose returns of income the said properties are reflected Held that - In the back drop of the assessee being non co-operative through out assessment proceedings as the assessee neither filed return of income in pursuant to notice u/s 153A nor participated in the assessment proceedings u/s 153A. The assessee has also not filed complete evidences to support its contentions before learned CIT(A) and in remand report proceedings before AO thereby crippling AO to do complete enquiry/verification as is required with respect to these immovable properties and its sources leading to adverse comments by the AO in remand report which remained un-complied with as of now as the learned CIT(A) just accepted the contentions of the assessee without satisfying the adverse comments by the AO which were valid observations of the AO in the context of search assessment as also seized material during search operations u/s 132. The assessee is also not appearing before the tribunal in second round of litigation despite several notices. Revenue has filed this appeal as it is aggrieved by learned CIT(A) granting relief to the assessee. The learned CIT-DR has vehemently objected to learned CIT(A) allowing the relief to the assessee without complying with all the adverse finding of the AO in remand report proceedings. Thus with the above background, the appellate order of learned CIT(A) cannot be sustained in the eyes of law and is set aside and matter is once again restored back to the file of learned CIT(A) for fresh adjudication on merits in accordance with law. The assessee be given proper and adequate opportunity of being heard by the learned CIT(A) in denovo proceedings and all relevant evidences and explanations be admitted in the interest of justice. The learned CIT(A) shall also consider ratio of decision of Hon ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation(Nhava Sheva) Limited (2015 (5) TMI 656 - BOMBAY HIGH COURT ) before adjudicating appeal de-novo in set aside proceedings.

Issues Involved:
1. Deletion of addition on account of investment in properties.
2. Deletion of addition on account of unconfirmed loans.
3. Deletion of addition on account of unexplained bank deposits.
4. Deletion of addition on account of household expenses.
5. Addition of alleged undisclosed income from long-term capital gains on sale of shares.
6. Addition of alleged unexplained expenditure incurred on purchase and sale of shares.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Investment in Properties:
The Revenue's appeal for the assessment year (AY) 2002-03 involved the deletion of an addition of ?85,50,000 on account of investment in properties. The Assessing Officer (AO) added this amount due to the assessee's failure to explain the sources of funds for property investments. The CIT(A) deleted the addition, but the Tribunal found that the CIT(A) did not adequately address the AO's adverse remarks in the remand report. The Tribunal set aside the CIT(A)'s order and remanded the matter back for fresh adjudication, emphasizing the need for proper verification of the sources of funds and the authenticity of the transactions.

2. Deletion of Addition on Account of Unconfirmed Loans:
For AY 2003-04, the Revenue contested the deletion of ?41,58,241 on account of unconfirmed loans. The AO had added this amount due to the assessee's failure to provide confirmations and prove the identity, creditworthiness, and genuineness of the loan creditors. The CIT(A) deleted the addition but failed to address the AO's adverse remarks in the remand report. The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication, emphasizing the need for proper verification of the loan confirmations and the sources of funds.

3. Deletion of Addition on Account of Unexplained Bank Deposits:
For AY 2006-07, the Revenue appealed against the deletion of ?23,81,553 on account of unexplained bank deposits. The AO had added this amount due to the assessee's failure to explain the sources of credits in the bank account. The CIT(A) deleted the addition but did not adequately address the AO's adverse remarks in the remand report. The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication, emphasizing the need for proper verification of the sources of bank deposits.

4. Deletion of Addition on Account of Household Expenses:
For AY 2006-07, the assessee appealed against the addition of ?3,00,000 towards estimated household expenses. The AO made this addition due to the assessee's failure to furnish details of household expenses and sources of funds. The CIT(A) upheld the addition, but the Tribunal found that the CIT(A) did not adequately consider the assessee's explanations. The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication, directing the CIT(A) to consider all contentions and explanations provided by the assessee.

5. Addition of Alleged Undisclosed Income from Long-term Capital Gains on Sale of Shares:
For AY 2003-04, the assessee appealed against the addition of ?13,55,355 as alleged undisclosed income from long-term capital gains on the sale of shares. The AO treated the transactions as sham, citing statements from brokers denying the transactions and the lack of evidence for payments and receipt of shares. The CIT(A) upheld the addition, and the Tribunal agreed, finding no infirmity in the orders of the authorities below. The Tribunal dismissed the assessee's appeal, holding that the transactions were not genuine.

6. Addition of Alleged Unexplained Expenditure Incurred on Purchase and Sale of Shares:
For AY 2003-04, the assessee also appealed against the addition of ?67,767 as alleged unexplained expenditure on the purchase and sale of shares. The AO made this addition on the grounds that the transactions were sham and involved accommodation entries. The CIT(A) upheld the addition, and the Tribunal agreed, finding no infirmity in the orders of the authorities below. The Tribunal dismissed the assessee's appeal, holding that the estimate of commission paid for arranging accommodation entries was reasonable.

Conclusion:
The Tribunal set aside the CIT(A)'s orders on several issues and remanded the matters for fresh adjudication, emphasizing the need for proper verification of the sources of funds, loan confirmations, and bank deposits. The Tribunal upheld the additions related to alleged undisclosed income from long-term capital gains and unexplained expenditure on the purchase and sale of shares, finding no infirmity in the orders of the authorities below. All appeals were disposed of as indicated above.

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