2021 (10) TMI 859 - AT - Income Tax

Addition of on-money received @ 30% over and above the agreement value - CIT(A) deleted the addition as made by the AO on account of on money on the ground that neither the assessee s name nor the name of the projects done by the assessee is on document found in seach on the basis of which the addition was made by the AO - HELD THAT - As decided in own case 2019 (4) TMI 267 - ITAT MUMBAI perusing the orders of the Coordinate Bench of ITAT in the case of group concern with regard to the same search, we are also of the view that the statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, Ld. DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, the AO should not have made the addition to the total income of the assessee. That the order of Ld. CIT(A) does not suffer from any legal or factual infirmity. Moreover, taking into consideration, the decision of the Coordinate Bench of ITAT in the case of group concern and also in order to maintain judicial consistency, we apply the same findings in the present case which are applicable mutatis mutandis. Resultantly this ground raised by the revenue stands dismissed. Addition u/s 68 - unsecured loans receipt - HELD THAT - We find that the amount of loans taken by the assessee is sufficiently proved. Under these circumstances, we are inclined to uphold the order of Ld. CIT(A) in respect of 7 parties wherein the Ld. CIT(A) deleted the addition - we are not in agreement with the findings of Ld. CIT(A) on the loan taken from V.J. Shah Co after examining all the evidences which were also filed before the Ld. CIT(A) and consequently we set aside the order of Ld. CIT(A) so far as the part confirmation in respect of whom the necessary evidences were filed before us also. Therefore, appeal of the Revenue is dismissed whereas the appeal of the assessee is allowed. Protective addition as made in the hands of the assessee - substantive addition made by the AO in the hands of Shri Jitendra Mehta have now been confirmed by the Ld. CIT(A) without appreciating the fact that Shri Jitendra Mehta has challenged the decision of Ld. CIT(A) before the Tribunal - HELD THAT - AO observed that respondent-assessee has availed loan at differential rate of interest and accordingly treated the differential rate which was not accounted for in the books of accounts as unexplained expenditure under section 69C of the Act and added the same to the income of the assessee on a protective basis. CIT(A) deleted the addition on the ground that substantive addition made in the hands of Shri Jitendra Mehta (legal heir Rohan Mehta had already confirmed vide order dated 29.03.2019 and thus deleted the protective addition made in the hands of the assessee. After having perused the order of Ld. CIT(A) and also various decisions relied upon we are of the view that the protective addition has rightly been deleted by the Ld. CIT(A) in the hands of respondent-assessee and accordingly we are inclined to dismiss the ground No.4 raised by the Revenue by upholding the order of Ld. CIT(A). Unexplained interest expenditure under section 69C - CIT(A) has deleted the addition on the ground that assessee has denied having taken any cash loan AND no corroborative evidences were brought on record - HELD THAT - CIT(A) has rightly deleted the addition on the ground that there were no corroborative evidences except the statement of Mr. Anuj Shah. Accordingly, the ground No.5 is dismissed by upholding the order of Ld. CIT(A). Disallowance of telephone and conveyance expenses - AO disallowed @ 20% of the conveyance expenses as personal element in these expenses can not be ruled out - CIT(A) deleted the addition on the ground that AO has failed to establish that said expenditure was not incurred wholly and exclusively for the purpose of business - HELD THAT - As we find that in this case the addition has been made without pointing any defect or deficiency in the bills, vouchers and books of accounts of the assessee or bringing on record any concrete evidence that some part of the expenditure related to the personal affairs of the director. Having examined all the facts before us we find that the Ld. CIT(A) has correctly held that the disallowance is just based on the presumptions, surmises and conjunctures and rightly deleted the disallowance. Accordingly, we dismiss the ground No.4 by upholding the order of the Ld. CIT(A). Addition made by the AO on account of non reconciliation of AIR - HELD THAT - We find that the assessee has filed reconciliation before the Ld. CIT(A) and based on the said reconciliation the Ld. CIT(A) deleted the addition made by the AO. The Ld. CIT(A) recorded a finding of fact that the amount of ₹ 24,66,760/- has been duly accounted in the books of accounts of the assessee and this amount represented the interest received from Roxina Real Estate Pvt. Ltd. and TDS on interest under section 194A has been deducted of ₹ 2,46,676/- on the said interest. The Ld. CIT(A) also noted that the said interest income has been reduced from the interest paid to various parties and therefore net interest was shown on the debit side of the P L account. It was also noted by Ld. CIT(A) that a net interest was debited in P L account. - Decided against revenue.

Summary

Issues Involved:
1. Addition of on-money received by the assessee.
2. Addition under Section 68 for unexplained cash credits.
3. Protective addition of cash interest paid.
4. Unexplained interest expenditure under Section 69C.
5. Disallowance of conveyance and telephone expenses.
6. Non-reconciliation of AIR information.

Detailed Analysis:

1. Addition of On-Money Received by the Assessee:
The Revenue challenged the deletion of an addition of ?2,96,10,000/- made by the AO on account of on-money received at 30% over the agreement value. The AO relied on statements from various employees and directors during the search, which were later retracted. The CIT(A) deleted the addition, stating that the seized documents did not mention the assessee or its projects. The Tribunal upheld the CIT(A)'s decision, referencing similar cases within the group where no incriminating material was found. The Tribunal emphasized that statements without corroborative evidence cannot justify additions.

2. Addition under Section 68 for Unexplained Cash Credits:
The AO added ?60,00,000/- to the income of the assessee under Section 68 for unexplained cash credits, which the CIT(A) reduced to ?5,00,000/-. The Tribunal found that the assessee had provided sufficient evidence, including loan confirmations, ITRs, and bank statements, to substantiate the identity, creditworthiness, and genuineness of the transactions for seven out of eight parties. The Tribunal upheld the deletion of ?55,00,000/- and also deleted the remaining ?5,00,000/- addition, as the necessary evidence was provided.

3. Protective Addition of Cash Interest Paid:
The AO made a protective addition of ?1,77,82,408/- for cash interest paid, based on seized documents and statements recorded during the search. The CIT(A) deleted the protective addition after confirming the substantive addition in the hands of Shri Jitendra Mehta. The Tribunal upheld the CIT(A)'s decision, noting that the protective addition was rightly deleted as the substantive addition was confirmed.

4. Unexplained Interest Expenditure under Section 69C:
The AO added ?12,000/- for unexplained interest expenditure based on a statement from Mr. Anuj Shah, who admitted to receiving interest from the assessee. The CIT(A) deleted the addition, stating that there was no corroborative evidence to support the statement. The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was based on mere conjectures and lacked supporting evidence.

5. Disallowance of Conveyance and Telephone Expenses:
The AO disallowed 20% of conveyance expenses and 30% of telephone expenses, suspecting personal use. The CIT(A) deleted the disallowance, stating that the AO failed to establish that the expenses were not incurred for business purposes and that the disallowance was based on presumptions. The Tribunal upheld the CIT(A)'s decision, emphasizing that disallowances cannot be made without concrete evidence.

6. Non-Reconciliation of AIR Information:
The AO added ?24,66,760/- for non-reconciliation of AIR information. The CIT(A) deleted the addition, noting that the amount was accounted for in the books as interest received and netted against interest paid. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had duly accounted for the amount in its books.

Conclusion:
The Tribunal dismissed the Revenue's appeals and allowed the assessee's appeals, upholding the CIT(A)'s decisions on all issues. The judgments emphasized the necessity of corroborative evidence for additions and disallowances, and the importance of substantiating claims with proper documentation.