2017 (12) TMI 1344 - AT - Income Tax

Unexplained expenditure based on seized document - Held that - The assessee was required to produce complete books of accounts and vouchers of M/s Rashiwa International Ltd. so that the Revenue Authorities could reconcile the name of the parties and amount appearing in page No. 6 of Annexure A-1 with the amount outstanding from the relevant parties as on 05/12/1998 in the books of accounts of M/s. Rashiwa International Ltd. Since this exercise of reconciling the amounts appearing in seized documents with the books of accounts of M/s Rashiwa International Ltd. has not been carried out by the lower authorities due to failure on account of the assessee and now before us the learned counsel has assured that all relevant documents shall be produced before the Assessing Officer if matter is restored to the file of the Assessing Officer. In the circumstances we are of the view that true facts should come on record for deciding issue-in-dispute judiciously. Thus the fact whether the amounts appearing in page No. 6 of Annexure A-1 are outstanding debtors of M/s Rashiwa International Ltd. need to be examined thoroughly. Accordingly we restore the issue-in-dispute to the file of the Assessing Officer for deciding afresh with the direction to the assessee to produce all the necessary document/evidence in support of its claim. The Assessing Officer may also examine/verify the books of accounts of the parties appearing in page No. 6 of Annexure A-1 of seized documents for cross-verification of the claim of the assessee. Accordingly the ground No.1 is allowed for statistical purposes. Addition of undisclosed intercorporate deposits (ICDs) - Held that - Assessee itself has admitted that amount in question are in lakhs which shows that the assessee is aware of the transactions recorded in the paper and it cannot shift its responsibility onto the Revenue. We also note that the Assessing Officer has not recorded in the impugned assessment order as which are those seized documents having handwriting similar to the paper in question. In view of the above circumstances we feel it appropriate to restore the issue in dispute to the file of the Assessing Officer for deciding afresh with the direction to the assessee to file all documentary evidences in support of its claim that the paper does not belong to the assessee or to whom it belongs for discharging its onus of rebutting the presumption against the assessee under section 132(4A) Unexplained source of repayment of loan on the basis of Annexure A-40 of seized document - Held that - to ascertain the facts whether any loans or deposits were taken by the assessee from those parties and subsequently re- payment thereof if any inquiry from those parties is essential. In view of the facts and circumstances we feel it appropriate to restore the matter to the file for Assessing Officer for deciding afresh with the direction to the assessee to produce intermediary/agent and parties mentioned in the Annexure A-40 before the Assessing Officer. The assessee shall be afforded adequate opportunity of being heard. Accordingly ground no. 3 of the appeal is allowed for statistical purposes. Disallowance of interest corresponding to the loan utilized for illegal purposes - Held that - intercorporate deposits of 1.5 crore has been made out of the packing credit availed by the assessee company for export business. The Ld. counsel of the assessee has not produced any documentary evidence to support its contention that sufficient interest free funds were available with the company for extending intercorporate deposits of 1.5 crore to the companies of Sri Keshav Bangur. The Ld. counsel also failed to establish that the intercorporate deposit made was a business transaction in regular course. In such circumstances we agree with the finding of the Ld. CIT(A) that the deposit of 1.5 crore was for non-business purposes and the corresponding interest claimed as expenditure on packing credit limits by the assessee company was not allowable.

Summary

Issues Involved:
1. Addition of ?25,43,192/- as unexplained expenditure.
2. Addition of ?40,78,000/- as undisclosed intercorporate deposits (ICDs).
3. Addition of ?1,33,22,590/- as unexplained source of repayment of loan.
4. Addition of ?37,50,000/- as disallowance of interest on loans used for illegal purposes.
5. Addition of ?1,76,29,450/- on account of a sale agreement.

Detailed Analysis:

1. Addition of ?25,43,192/- as unexplained expenditure:
The Assessing Officer (AO) added ?25,43,192/- to the assessee's income as unexplained expenditure based on a seized document (Annexure A-1). The assessee claimed this amount was outstanding from various parties related to M/s Rashiva International Ltd., supported by trial balance and general ledgers. The CIT(A) upheld the addition, noting the evidence provided was insufficient. The Tribunal restored the issue to the AO for fresh examination, directing the assessee to produce complete books of accounts and vouchers for verification.

2. Addition of ?40,78,000/- as undisclosed intercorporate deposits (ICDs):
The AO added ?40,78,000/- based on a rough noting on a seized document (Annexure A-2), presuming it indicated outstanding ICDs. The assessee argued the document did not belong to it and the amounts were in lakhs, not crores. The CIT(A) upheld the addition, citing the presumption under section 132(4A). The Tribunal restored the issue to the AO, directing the assessee to provide documentary evidence or identify the actual owner of the document.

3. Addition of ?1,33,22,590/- as unexplained source of repayment of loan:
The AO added ?1,33,22,590/- based on post-dated cheques and promissory notes found in Annexure A-40, presuming the loans were repaid in cash. The assessee claimed these documents were related to a non-materialized loan proposal. The CIT(A) upheld the addition, noting the lack of third-party confirmations. The Tribunal restored the issue to the AO, directing the assessee to produce intermediaries and parties mentioned in the documents for verification.

4. Addition of ?37,50,000/- as disallowance of interest on loans used for illegal purposes:
The AO disallowed interest on ?1.5 crores of packing credit limit used for intercorporate deposits to companies of the Bank of Rajasthan's chairman, considering it an illegal advance. The CIT(A) upheld the disallowance for FY 1996-97 and 1997-98, reducing the total disallowance to ?37,50,000/-. The Tribunal upheld the CIT(A)'s decision, noting the assessee failed to prove the deposits were for business purposes or funded by interest-free sources.

5. Addition of ?1,76,29,450/- on account of a sale agreement:
The AO added ?1,76,29,450/- based on a seized sale agreement, presuming it represented undisclosed income. The assessee explained it was an unrealized export sale through M/s Tartan Infomark Ltd. The CIT(A) deleted the addition, noting the property was not transferred to the assessee and the amount was a receivable. The Tribunal restored the issue to the AO for verification of the sale and receivable amounts from the assessee's books of accounts and financial statements.

Conclusion:
The Tribunal restored several issues to the AO for fresh examination, emphasizing the need for thorough verification and adequate opportunity for the assessee to present relevant evidence. The appeals were partly allowed for statistical purposes.