2018 (6) TMI 225 - AT - Income Tax

Unexplained investment in purchase of land at Alangad village - payment on on money - Held that - There is no evidence available on record that the assessee has paid on-money, on the basis of which the Assessing Officer has quantified the on-money payment, he cannot make the impugned addition. The evidence brought on record is having no direct link to suggest that the amount deposited in the vendor s Bank account was by the present assessee towards payment of on-money and merely on the basis of the fact that the vendor had accepted the payment of on-money, no addition is to be made. Sometimes, intentionally a lesser value may be shown in the sale deed. Even if it is assumed to be so, unless it is proved that the agreement was acted upon and unless the amount stated in the agreement was paid for sale, the court cannot come to the conclusion that the price mentioned in the sale deed is not correct. In this case, appeal of the Revenue was dismissed - since the Assessing Officer has failed to prove the payment of on-money by bringing on any direct evidence, we are not in a position to sustain the addition - Decided in favour of assessee Disallowance of entire expenditure claimed against professional receipts as a result of changing head of income from business or profession to income from other sources - Held that - when there is a valid agreement to render the services as a retainer and the assessee being an advocate, maintains office for the purpose of his profession, the Assessing Officer is not justified in disallowing the expenditure on the reason of non rendering of services to a particular client. In our opinion when the assessee made himself ready to be available to the client and the client has not availed his services as a retainer, we do not find fault with the assessee so as to disallow the expenditure incurred by the assessee. In our opinion, the Assessing Officer did not allow the expenditure only on the presumption that the assessee has not rendered the services though the assessee has kept himself ready to render the services. In AY 2009-10 and 2010-11, there is no such disallowance. - Decided in favour of assessee Unexplained deposit in the assessee s Bank account - Held that - The assessee was not able to prove the identity as well as the creditworthiness of the creditors. Hence, we do not find any infirmity in the finding of the CIT(A) and confirm it. This ground of appeal of the assessee is rejected. Cash gifts received from relatives - Held that - There was an amount of ₹ 2.5 lakhs which is the opening balance and this credit was not emanating in the assessment year under consideration. As it is carried forward from earlier assessment years, it cannot be considered as unexplained credit in the assessment year under consideration. Hence, to that extent, the addition cannot be made in this assessment year. However, the balance ₹ 5 lakhs represents the cash gifts received by the assessee in the assessment year under consideration for which the assessee has not given any details to prove the identity of the party from whom it was received. Further, the genuineness of the transactions is not established. Hence, we have no hesitation in confirming the addition to the extent of ₹ 5 lakhs. Consideration paid in cash for the purchase of the land as unexplained investment - Assessing Officer while arriving at the fair market value of the impugned land, considered the average value of six properties mention in the earlier para - Held that - property bearing Document No. 1755/08 is a small plot with asphalted roads. This property is in a better position and the value of this property cannot be compared with the value of the impugned property of the assessee. Further, the property in Document No. 1985/109 mentioned earlier, is a small plot with house and asphalted roads. This property also cannot be compared with the impugned property of the assessee. Being so, these two properties are to be taken out from comparison. The remaining four properties are to be considered to arrive at the fair market value of the property. For this purpose, we remit this issue to the file of the Assessing Officer to re-calculate the value of the assessee s property on the basis of average value of the property Unexplained investment in construction of building at Annamanada - sole basis for addition was the DVO report - Held that - . In this case, there is no rejection of books of accounts by the Assessing Officer. Hence, in our opinion, referring the matter to the DVO for valuation of the property itself is bad in law. Even otherwise, the Assessing Officer has no other evidence than the DVO report. In our opinion, the DVO report cannot be the only basis for making the addition. More so, the DVO has applied Central PWD rates. When the property is situated in a mofussil area, the State PWD rates have to be applied. - Decided in favour of assessee Addition as unexplained credits - Held that - Lower authorities came to the conclusion that the assessee s explanation regarding the credit could not be accepted and we cannot disturb such finding as the assessee has not brought any fresh material on record before us. More so, mere furnishing of name and address of the lender would not amount to sufficient discharge of the burden placed upon the assessee u/s. 68 of the Act. This is because u/s. 68 of the Act, the assessee has to prove all the ingredients as mentioned earlier. When the identity of the creditor and the creditworthiness of the credits were not established, addition u/s. 68 of the Act is justified. Addition of agricultural income as undisclosed income - no separate books of account are kept for agricultural income - Held that - a small farmer like the present assessee cannot be expected to maintain separate accounts for agricultural income as stated by the Assessing Officer. Since the Assessing Officer has not doubted the owning of the agricultural land and raising of crops, it is appropriate to estimate the income from such agricultural activities at ₹ 1,50,000/- as against ₹ 2,45,198/-. Accordingly, this ground of appeal of the assessee is partly allowed. Revision u/s 263 - incurring of development expenditure on the land at Varapuzha - Held that - Since the Assessing Officer has taken a judicial view consciously based on proper enquiry and appreciation of the relevant facts and legal aspects of the case, the judicial view taken by the Assessing Officer placed the matter outside the purview of sec. 263 of the Act. The CIT has not shown what kind of enquiry is to be made by the Assessing Officer so as to make the disallowance. Further, the loss of revenue as a consequence of the order by the Assessing Officer cannot be treated as erroneous or prejudicial to the interests of the Revenue so as to invoke the provisions of sec. 263 by the CIT. In our opinion, the CIT cannot assume jurisdiction u/s. 263- Decided in favour of assessee Disallowance of expenditure claimed against professional receipts as a result of changing head of income from business or profession to head of income from other sources - Held that - Assessing Officer is precluded from changing the head of income from profession to the head of income from other sources. We direct the Assessing Officer to allow the above expenditure incurred by the assessee Value of motor car - Held that - In this case the payment towards purchase of car was paid by M/s. Rosy Blue (India) Pvt. Ltd., though the registration was in the name of the assessee as per the valid agreement. On the basis of the agreement dated 30/06/2009, the assessee sold the car at ₹ 2,90,000/- and the amount was repaid to M/s. Rose Blue India Pvt. Ltd. This fact was not at all disputed by the lower authorities. According to the Ld. DR, it is only a make believe arrangement. To say like this, the Department has no material in its possession. It is only a surmise and conjecture. By any stretch of imagination, it cannot be presumed that the assessee has routed her own money through M/s. Rosy Blue India Pvt. Ltd. In such circumstances, we are inclined to delete the addition Disallowance of depreciation on motor car - @ 50% OR 15% - use for purposes of bunions purposes - Held that - The period of acquisition of commercial vehicle on or after 1st June, 2009 or on or before October, 2009 was amended as per the amended provisions with effect from 1.4.2009. Being so, commercial vehicle purchased upto October, 2009 is entitled for higher depreciation. Hence, we direct the Assessing Officer to grant depreciation at the rate of 50% on the commercial vehicle acquired by the assessee. Thus, this ground of appeal of the assessee is allowed.

Summary

Issues Involved:

1. Addition towards unexplained investment in the purchase of land.
2. Disallowance of expenditure claimed against professional receipts by changing the head of income.
3. Unexplained credits in the bank account.
4. Cash gifts received from relatives.
5. Unexplained investment in the purchase of property.
6. Unexplained investment in construction of a building.
7. Unexplained investment in the purchase of land in the name of the assessee’s mother.
8. Depreciation on motor car.
9. Agricultural income treated as undisclosed income.
10. Revision of assessment orders by CIT under section 263 of the I.T. Act.

Detailed Analysis:

1. Addition towards unexplained investment in the purchase of land:
The assessee purchased land, and the Assessing Officer (AO) added an amount towards unexplained investment based on the seller's statement that the actual consideration was higher than documented. The Tribunal found that the AO did not provide corroborative evidence to substantiate the payment of on-money and relied solely on the seller’s statement. The Tribunal deleted the addition, noting that the burden of proof lies with the Revenue, and unsupported third-party statements cannot be considered as evidence.

2. Disallowance of expenditure claimed against professional receipts by changing the head of income:
The AO treated professional receipts as income from other sources and disallowed related expenses. The Tribunal held that the existence of a valid agreement for retainer-ship and the absence of any service does not change the nature of the income. The Tribunal directed the AO to allow the expenditure as the assessee maintained an office and necessary setup for professional services.

3. Unexplained credits in the bank account:
The assessee failed to furnish confirmation letters from relatives for credits in the bank account. The Tribunal upheld the addition as the assessee could not prove the identity and creditworthiness of the creditors.

4. Cash gifts received from relatives:
The AO treated cash gifts as unexplained income due to the lack of details. The Tribunal partially allowed the appeal by confirming the addition for the amount received during the assessment year but deleted the addition for the opening balance carried forward from earlier years.

5. Unexplained investment in the purchase of property:
The AO added amounts based on the seller's sworn statement regarding the actual consideration received. The Tribunal deleted the addition, emphasizing that unsupported third-party statements without corroborative evidence cannot justify the addition.

6. Unexplained investment in construction of a building:
The AO relied on the DVO's report to estimate the cost of construction. The Tribunal held that the AO must reject the books of account before referring the matter to the DVO and that the DVO report alone cannot be the basis for addition. The Tribunal deleted the addition, noting the use of Central PWD rates instead of State PWD rates.

7. Unexplained investment in the purchase of land in the name of the assessee’s mother:
The AO added the entire consideration as undisclosed investment based on the seller's statement. The Tribunal deleted the addition, reiterating that unsupported third-party statements without corroborative evidence cannot be relied upon.

8. Depreciation on motor car:
The AO disallowed higher depreciation claimed on the motor car, treating it as a non-commercial vehicle. The Tribunal directed the AO to allow higher depreciation as per the amended rules, which include light motor vehicles used for business or profession.

9. Agricultural income treated as undisclosed income:
The AO treated agricultural income as undisclosed due to the lack of separate books of account. The Tribunal estimated the agricultural income at a reasonable amount, noting that small farmers are not expected to maintain separate accounts.

10. Revision of assessment orders by CIT under section 263 of the I.T. Act:
The CIT revised assessment orders on various grounds, including lack of enquiry by the AO. The Tribunal quashed the CIT's orders, holding that the AO had taken a possible view based on proper enquiry and that the CIT cannot substitute his view without new material. The Tribunal emphasized that the loss of revenue alone does not justify revision under section 263.

Conclusion:
The Tribunal allowed the appeals partly or fully, depending on the issues, and emphasized the need for corroborative evidence to support additions and the importance of proper enquiry by the AO. The Tribunal also highlighted the limitations of the CIT's powers under section 263.