2019 (9) TMI 724 - AT - Income Tax

Reopening of assessment u/s 147 - valid source of the amount used for repayment of loan amount - assessee claimed the source from the agricultural income, rental income and interest income were assessed to income tax. - HELD THAT - From the perusal of the assessment order, it is clear that the AO assessed agricultural income, rental income and interest income and the same should be treated as amount available for repayment of loan in the absence of any evidence to the contrary. AO had not brought any material on record to demonstrate that the amounts were utilized for some other purpose. AO was not justified in making the addition without giving any valid reason. CIT(A) ought not have confirmed the action of the AO on the ground that repayment of loan amount was not accounted in the books of accounts, as this cannot be reason for making the impugned addition. We delete the addition made by the Assessing Officer. The appeal filed by the assessee is allowed. Assessment u/s 153C - unexplained investments made in purchase of land - HELD THAT - Admittedly, the property was bought by registered sale deed, whether the assessee had source of income for the purpose of purchase of property is an issue which requires thorough examination in the respective assessments of the assessee. The assessment order is silent as to contents of the seized materials. Therefore it cannot be said that material seized suggest any unaccounted investments in the said land. However during the course of present assessment proceedings, the assessee had offered an explanation in support of the source of investments made in purchase of property. The seized material does not contain anything to show that the explanation offered by the assessee cannot be believed or false. In the circumstances, the impugned additions cannot be sustained in the eyes of law as the addition was not made based on the incriminating material found as a result of searched material. Accordingly, the assessment order of the lower authorities are set aside and appeal of the assessee is allowed.

Issues Involved:
1. Addition on account of repayment of loan.
2. Addition on account of unexplained investments.
3. Disallowance of agricultural income.
4. Disallowance of advance received from parties.
5. Disallowance of loan transactions.
6. Disallowance of LIC claim.

Issue-wise Detailed Analysis:

1. Addition on account of repayment of loan:
The appellant, engaged in real estate, faced a reassessment for AY 2009-10 following a search on another individual. The Assessing Officer (AO) added ?3,05,000 to the appellant’s income, questioning the source of loan repayment from UCO Bank. The appellant cited agricultural, rental, and interest income as sources. The AO did not accept this, claiming the repayment was unaccounted. The appellate tribunal found no evidence from the AO that the funds were used otherwise and deleted the addition, allowing the appeal.

2. Addition on account of unexplained investments:
For AY 2011-12, the AO made several additions totaling ?1,31,32,450, including investments in various properties. The appellant explained the sources, including opening cash balance, agricultural income, advances from parties, and loans. The AO disbelieved these explanations, citing lack of evidence and inconsistencies. The Commissioner of Income Tax (Appeals) [CIT(A)] partially allowed the appeal, reducing the addition by accepting some sources. The tribunal found the AO’s additions unsustainable as they were not based on seized materials and allowed the appeal, setting aside the lower authorities' orders.

3. Disallowance of agricultural income:
The AO restricted the agricultural income to ?4,72,500, disbelieving the appellant’s claim of ?10,00,000. The appellant argued that the AO had accepted ?12,56,050 as agricultural income in the previous year. The tribunal noted the inconsistency and allowed the appellant’s claim, finding the restriction unjustified.

4. Disallowance of advance received from parties:
The AO added ?9,90,000 and ?24,75,000 as unexplained income, disbelieving the advances received from various parties for property transactions. The appellant provided confirmation letters and personal appearances of some parties. The tribunal found the AO’s disallowance unjustified as the explanations were supported by evidence and allowed the appeal.

5. Disallowance of loan transactions:
The AO disbelieved the appellant’s claim of loans amounting to ?19,70,000 from UCO Bank and others, citing lack of proof. The tribunal found the AO’s disallowance unsustainable as the appellant provided sufficient explanation and evidence for the transactions, allowing the appeal.

6. Disallowance of LIC claim:
The AO disallowed the appellant’s claim of ?1,40,000 as loan from LIC, questioning its authenticity. The tribunal found the disallowance unjustified as the appellant provided adequate proof and allowed the appeal.

Summary:
The tribunal allowed the appeals for AY 2009-10, 2011-12, and 2012-13, finding the AO’s additions and disallowances unjustified and unsupported by evidence. The tribunal emphasized the need for the AO to provide valid reasons and evidence for any additions or disallowances, which were lacking in these cases. The appeals were thus decided in favor of the appellant.

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