2021 (8) TMI 756 - AT - Income Tax

Unexplained cash credit u/s 68 - in bank accounts, certain cash deposits have been found - HELD THAT - A perusal of the seized material would reveal that xerox copies of bank passbooks of these persons has been found from the possession of the assessee and not the original passbooks as alleged by Ld. AO. In these bank accounts, certain cash deposits have been found which has been assumed to be assessee s own money and accordingly, the loans have been added as unexplained cash credit. It could be gathered that these were merely booking advances received through banking channels. The bookings have subsequently been cancelled and the amounts have been refunded to these persons along with compensation. The compensation amount has duly been offered to tax by these persons in their return of income. This being so, the amount could not be held to be unexplained cash credit in the hands of the assessee. There is no material on record to prove that the assessee deposited its own money in these accounts and later on transferred it in the garb of booking amount or as loans. Moreover, the passbooks are not in respect of assessee s own bank account rather the accounts are third-party bank accounts. No explanation has been sought by Ld. AO from any of these persons and no enquiry whatsoever is shown to have been done in the assessment order to sustain the addition. It is trite law that no addition could be made merely on the basis of assumptions and presumptions. Hence, we are inclined to delete this addition. This ground stands allowed. Parking charges addition - Certain loose papers were seized which revealed the details of parking lot allotted by the assessee in the projects to various customers - HELD THAT - Loose papers were merely a dumb document and nothing could be conclusively inferred upon perusal of the same. The explanation of the assessee was a plausible one and we concur that merely on the basis of this paper, the addition could not be sustained. So far as the statement of Shri Kulvinder Singh Narula is concerned, we find that he has filed another affidavit dated 21/01/2020 wherein it has been admitted by him that the earlier statement was taken under undue pressure and the fact of having paid cash towards parking was not true. Thus, the statement of this person could not be relied upon and the same alone was not sufficient enough to make the additions particularly in the background of the fact that the assessee filed affidavit of 5 more flat owners wherein these persons have denied having paid any cash to the assessee. It is pertinent to note that no independent enquiry has been conducted by Ld. AO from any flat owners to corroborate the additions. This being so, the impugned addition could not be sustained.

Summary

Issues Involved:
1. Unsecured loans and their treatment under Section 68 of the Income Tax Act.
2. Addition of parking charges as undisclosed income.
3. Rejection of books of accounts under Section 145(3) of the Income Tax Act.
4. Invocation of Section 153A of the Income Tax Act for making additions without incriminating material.

Issue-wise Detailed Analysis:

1. Unsecured Loans:
- The assessee was assessed for unsecured loans amounting to ?74.69 Lacs, which were deemed unexplained cash credits under Section 68 of the Income Tax Act and added to the income. The interest paid on these loans, amounting to ?1.94 Lacs, was also added back.
- Upon appeal, the CIT(A) retained the addition of ?6.66 Lacs but deleted the rest, noting that no incriminating material was found during the search.
- The AO's addition was based on the discovery of passbooks from the assessee's premises, indicating immediate cash deposits preceding the loans, questioning the genuineness and creditworthiness of the transactions.
- The assessee argued these amounts were advances for flat sales, not loans, supported by allotment letters and financial statements.
- The CIT(A) upheld the additions by invoking Section 292C, presuming the documents' contents to be true unless proven otherwise.
- The Tribunal found no evidence that the assessee deposited its own money into these accounts and noted that the passbooks were third-party accounts. No independent enquiry was conducted by the AO. Thus, the addition was deleted.

2. Addition of Parking Charges:
- During a search, loose papers indicating parking lot allotments and unaccounted receipts were found. The AO added ?10.50 Lacs as undisclosed income.
- The assessee contended that the cheques for parking charges were not deposited and the amounts were never collected, supported by blank cheques found during the search.
- The AO rejected this explanation, interpreting the numeric figures on the documents as amounts received and corroborated by a statement from a flat owner, Shri Kulvinder Singh Narula.
- The CIT(A) upheld the addition, noting the incriminating documents and dismissing the assessee's explanations.
- The Tribunal found the loose papers to be inconclusive and accepted the assessee's explanation as plausible. The statement from Shri Narula was retracted in a subsequent affidavit, and no independent enquiry was conducted. Thus, the addition was deleted.

3. Rejection of Books of Accounts:
- The CIT(A) assumed jurisdiction under Section 145(3) and rejected the assessee's books of accounts, treating the parking charges as unaccounted receipts.
- The Tribunal's decision to delete the addition of parking charges rendered this issue infructuous.

4. Invocation of Section 153A:
- The assessee contested the invocation of Section 153A for making additions without incriminating material found during the search.
- The Tribunal admitted this additional ground, noting it was a legal issue not requiring new facts.
- The Tribunal's findings on the unsecured loans and parking charges addressed the concerns under Section 153A, leading to the deletion of related additions.

Conclusion:
- The appeals for all assessment years were partly allowed, with the Tribunal deleting the additions related to unsecured loans and parking charges, based on the lack of incriminating evidence and improper assumptions by the AO. The order was pronounced on 6th August 2021.