2020 (8) TMI 100 - HC - Income Tax

Assessment u/s 158BC - Unexplained investment computation u/s 69B - set off gross unaccounted payments on certain transactions against unaccounted receipts - HELD THAT - The assessee failed to furnish the basic and primary facts. Moreover, it appears that the Tribunal has also not considered the fact that the amount of ₹ 2.53 crores pertaining to the land deals at near Ramdev-pirni-tekro between Leela Housing and Infrastructure Housing Pvt. Ltd. and the Saumya Construction has been protectively taxed in the ends of the assessee and substantive addition has already been made in the hands of the Companies. Thus, such funds were prima facie not available for any further investment made by the assessee in his individual land business. With regard to other investments, as per the seized papers most of the investments have been made during the F.Y.1994-95. On money receipts pertaining to the second land deal of Ramdev-pirni-Tekro were received during the F.Y. 1993-94 and the entire on money payment from RDIL at ₹ 12.80 crores was received only from April 1995 onwards till September, 1995. Undisclosed income determined for investment and profit in remaining two land deals were also determined falling in the F.Y.95-96 and the brokerage amount was also not received. AO on the basis of the facts available on record has held that the assessee is not entitled to any set off of unaccounted income against the unexplained investment made as there is no co-relation between the unexplained cash receipts and unexplained investment. AO has rightly not granted the claim of the assessee for set off on the basis of the facts of the case as there is no even prima facie evidence to show that the income received by way of on money receipts was available for investment in the land deals and was not otherwise invested. Tribunal emphasized on a presumption that a reasonable view demands that subsequent payment should be presumed to be made out of the cash available from the earlier receipts, if any. The Tribunal without adverting to the facts has allowed the claim of the petition only on the ground of such presumption by referring to the principles of peak credit without applying the same to the facts of the case. Tribunal has also erred in discarding the fact of absence of any material to show that the assessee proving nexus or corelation between unaccounted cash receipts and payments. Therefore, in such circumstances, it appears that the Assessing Officer has rightly held that the assessee is not entitled to any claim of set off and all income as well as investment determined are liable to be considered without any set off against each other. - Decided against assessee. Allowable expenditure under Section 37 or business loss under Section 28 - unexplained and unaccounted cash investment which did not result into tangible benefit - HELD THAT - When the assessee claims that he has not received any benefit out of payment of unaccounted cash then onus would lie upon him to claim such payment as business loss. In the facts of the case, it appears that the Tribunal contrary to the evidence on record has made inferences on the basis of the assumption and presumption so as to remand the issue of the claim of the assessee of ₹ 2.93 Crore towards business loss. With regard to loss claimed by the assessee in respect of Jagatpur land deal, the Tribunal has arrived at the findings contrary to the material documentary evidence on record as the Tribunal misinterpreted the seized material so as to find error in the finding of the assessing officer which is based on the entries made in the seized papers at sr. No.21 and 105. Tribunal has considered irrelevant factors for holding that the assessing officer has considered twice the amount of ₹ 15 Lakhs by taking into consideration the entries in the seized papers observing that the assessing officer jumped from one seized paper to another, whereas on careful consideration of the assessment order, we are of the opinion that the Tribunal has arrived at a perverse finding contrary to the material on record. Question No.2 is also answer in negative i.e. in favour of the Revenue and against the assessee. Addition on two land deal - Tribunal has discarded the addition on the ground that furnishing the name in the area of farmers by the assessee would be enough to identify the person as Vejalpur is not such a big place that the person could not have been identified - HELD THAT - Finding arrived at by the Tribunal is nothing but a perverse finding because it is not possible to find out to locate or identify person only because he belongs to a particular area in absence of any specific address. Tribunal has committed grave error by shifting the burden on the department on the basis of such vague information provided by the assessee. Thus the very basis and foundation of the Tribunal to delete the addition made by the Assessing Officer is erroneous and perverse as the Tribunal has considered the irrelevant factor to arrive at such conclusion. With regard to the Sangvilla land deal it is not possible to understand on what basis the Tribunal has drawn such inference in absence of any corroborative evidence in support of such findings when the assessee has admitted in his statement that he paid ₹ 70 Lakhs after receiving the same from the prospective buyer, but such statement was not believed by the Assessing Officer as the assessee failed to provide the name of the person to whom the land was sold as well as the rate at which such land was sold. Tribunal further has erroneously and perversely held that as question was not asked to the assessee, the assessee cannot be faulted for not furnishing the details and the person to whom the land was sold and only because the assessee was a broker and he was not expected to make investment of his money. It appears that such findings are arrived at by the Tribunal only on the basis of the presumption and assumption and the findings given in para 42 are perverse as the same are not based on the materials on record but are arrived at after taking into consideration the irrelevant factors that the broker only bring the parties together and the prospective buyers pay to the prospective sellers may be through the broker. The Tribunal has therefore; committed error in drawing inference that either from the seized papers or from the statement which constitute the only basis, the addition cannot be sustained. Tribunal has arrived at perverse findings contrary to the evidence on record in case of two land deals of Amrakadam and Sangvilla without there being any evidence on record to arrive at such findings to delete the addition made by the Assessing Officer, which is supported by the cogent evidence on record. Question No.3 is also answered in negative i.e. in favour of the Revenue and against the assessee.

Summary

Issues Involved:
1. Set-off of unaccounted payments against unaccounted receipts.
2. Allowability of unexplained and unaccounted cash investment as business loss.
3. Tribunal's findings on Amrakadam and Sangvilla land deals.

Detailed Analysis:

Issue 1: Set-off of Unaccounted Payments Against Unaccounted Receipts
Facts and Tribunal's Findings:
- The assessee, a land dealer, was assessed under Section 158BD of the Income Tax Act, 1961, based on seized documents and statements during a search operation.
- The Assessing Officer (AO) rejected the assessee's claim of set-off of unaccounted cash payments against unaccounted cash receipts, citing lack of evidence and nexus between the receipts and payments.
- The Tribunal allowed the claim, stating that a reasonable view demands that subsequent payments should be presumed to be made out of earlier receipts, akin to a cash flow statement.

Revenue's Argument:
- The Revenue argued that the peak credit theory was inapplicable as the assessee failed to provide evidence of payments. The theory of telescoping requires a nexus between unaccounted receipts and expenses, which was absent.
- The Revenue cited several judgments to support their stance, emphasizing the need for concrete evidence to substantiate such claims.

Court's Opinion:
- The Court held that the AO rightly disallowed the set-off due to the lack of prima facie evidence showing that the income from on-money receipts was available for investment in land deals.
- The Tribunal's presumption-based approach was deemed unreasonable as it failed to consider the absence of material evidence proving the nexus between receipts and payments.
- The Court answered the question in favor of the Revenue, negating the Tribunal's decision.

Issue 2: Allowability of Unexplained and Unaccounted Cash Investment as Business Loss
Facts and Tribunal's Findings:
- The assessee claimed a loss of ?2.93 crores for payments made to Shri G.C. Patel, which did not materialize into tangible benefits.
- The AO rejected the claim, citing the lack of evidence and Shri G.C. Patel's denial of receiving the amount.
- The Tribunal remanded the matter back to the AO for further adjudication, allowing the claim based on the presumption that unaccounted investments were made for business purposes.

Revenue's Argument:
- The Revenue contended that there was no evidence of payment to Shri G.C. Patel and that the claim was based solely on the assessee's statements.
- It was argued that the Tribunal's findings were beyond the records and perverse.

Court's Opinion:
- The Court found that the Tribunal's decision was based on assumptions and lacked substantial evidence. The Tribunal failed to consider the AO's detailed findings and the absence of corroborative evidence.
- The Court held that the assessee did not discharge the onus of proving the payment, and the Tribunal's remand was unwarranted.
- The question was answered in favor of the Revenue, disallowing the claim of business loss.

Issue 3: Tribunal's Findings on Amrakadam and Sangvilla Land Deals
Facts and Tribunal's Findings:
- The AO made additions for unaccounted investments in Amrakadam and Sangvilla land deals, citing the assessee's failure to provide complete details of payments to farmers and other parties.
- The Tribunal deleted the additions, stating that the names of farmers provided by the assessee were sufficient for identification and that the AO failed to verify the information.

Revenue's Argument:
- The Revenue argued that the Tribunal's findings were perverse as the assessee did not furnish complete details, and the burden of proof was wrongly shifted to the Revenue.

Court's Opinion:
- The Court found the Tribunal's decision to be perverse and based on irrelevant factors. The Tribunal erroneously shifted the burden of proof to the Revenue and disregarded the AO's detailed findings.
- The Court held that the Tribunal's conclusions were contrary to the evidence on record and unsupported by substantial proof.
- The question was answered in favor of the Revenue, reinstating the AO's additions.

Conclusion:
The Court answered all three questions in favor of the Revenue, reversing the Tribunal's decisions on the set-off of unaccounted payments, the allowability of business loss, and the findings on the Amrakadam and Sangvilla land deals. The Tribunal's judgments were deemed perverse and contrary to the evidence on record.