2022 (4) TMI 584 - AT - Income Tax

Unexplained investment in purchase of property from Arvind Naik and Anusuya Naik - HELD THAT - In this case, the CIT(Appeals) has not brought out on record that the source of investment are same as referred in the order for AY 2007-08. Further there was registration of the impugned property for ₹ 2.35 crores. AO brought on record that the total sale consideration was ₹ 4 crores. There is no discussed on this issue by the CIT(Appeals). Hence it is appropriate to remit the entire issue to the CIT(Appeals) for fresh decision in accordance with law, after calling for a remand report from the AO. Addition on account of interest on cash loan - addition was made by the AO on the basis of scribblings in the seized material towards payment of interest - CIT(A) deleted the addition by observing that copies of seized material were not supplied to the assessee and also the assessee refused carrying out of loan transaction - HELD THAT - It is settled proposition of law in income tax cases that income tax liability is to be ascertained on the basis of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of linked material and evidence available before the AO. The proceedings before the income tax authorities have been described as quasi-judicial proceedings in character. More so, it was held in the case of Dhakeswari Cotton Mills Ltd. 1954 (10) TMI 12 - SUPREME COURT that assessment proceedings are purely administrative and the assessing office is not a court. As such, strict rule of evidence is not applicable in the income tax proceedings and proceedings before him are not judicial proceedings, though they are deemed to be as such for limited purposes. The AO has, no doubt, to hear evidence on such evidence made consisting of material which will be wholly ineligible in a court of law. In the present case, there is a valid seized material wherein there is entry showing payment of ₹ 15.60 lakhs. The assessee in spite of repeated opportunities simply denied the transaction and did not discharge the onus of explaining the seized material. In such circumstances, the AO having no option, made addition. In our opinion, as per section 292C of the Act, it is to be presumed that the seized material belonged to the assessee and the entries in the seized material is to be considered as correct to that effect and addition to be made, since the assessee failed to discharge the burden cast upon him. Accordingly, we sustain the addition made by the AO and the order of the CIT(Appeals) on this issue is reversed. Addition of non-refundable deposit from Godrej Properties - CIT(Appeals) deleted the addition on the reason that this amount has been shown as income under the head compensation - HELD THAT - AO has brought on record that this amount was not offered to tax in the assessment year. Contrary to this, the CIT(A) has observed that this amount has gone into the computation of income under the head compensation receipt and change of head is only a typographical error. However, we find that this was not brought out before the AO in spite of giving repeated opportunities to the assessee. Accordingly, we remit this issue to the file of CIT(Appeals) with a direction to call for a remand report from the AO and decide the issue afresh. Undisclosed investment in purchase of portion of the property at Kanyana Village - CIT(Appeals) noted that the total amount as per the agreement to sell for Kanyana village stated in the assessment order - HELD THAT - Before us, the contention of the ld. DR is that this amount does not pertain to addition made under any other head and it specifically pertains to balance payment made towards remaining portion of property at Kanyana village. In our opinion, these facts are to be examined by the CIT(Appeals) after obtaining a remand report from the AO. Accordingly, this issue is remitted to the CIT(Appeals) for fresh decision. Addition being peak credits in unaccounted bank accounts - CIT(A) considering the daily cash balance statement observed that there was sufficient cash balances on all the days of the year and there was no cash deficit on any given day and hence deleted the addition - HELD THAT - In our opinion, the plea of the ld. DR is fair as the assessee is required to prove that earlier withdrawals have been used for redeposit in bank account by furnishing the cash book and cash flow statement. Accordingly, we remit this issue to the CIT(Appeals) to decide the issue afresh after providing opportunity to both the parties. Addition of advance paid to Shantiniketan property - assessee in the sworn statement admitted to have paid advance paid to Prestige Shantiniketan property and since the same was not reflected in the balance sheet, the AO sought to tax the same as unexplained investment - HELD THAT - CIT(Appeals) observed that the total amount is appearing in the balance sheet and there is no dispute about it. The difference was an estimation error by assessee. The list of payments and amounts mentioned in the agreement match. He therefore deleted the addition on the reason that payments have been made through banking channels. While doing so, he relied on the personal balance sheet produced by the assessee without confronting the same to the AO. Being so, in the interest of justice, we remit this issue to the CIT(Appeals) to call for a remand report from the AO and decide the issue afresh. Unexplained credit in the name of Shri Moideen Bawa - CIT(A) deleted the addition on the reason that there is no debit balance in the name of assessee appearing in the balance sheet of Mr. Bava and assessee has not disputed this fact - HELD THAT - There is sufficient proof that advances made by Mr. Bava was on behalf of assessee. Had that been the case, the assets should have been reflected in the balance sheet of assessee on account of the above advances which has not been established by the assessee at any stage. Being so, the deletion of addition by the CIT(Appeals) is not justified. He should have called for remand report from the AO before totally deleting the addition. Accordingly, we remit this issue to the CIT(Appeals) to call for remand report from the AO and decide the issue afresh. Unexplained investment in purchase of property in the name of Mrs. A.K. Fouzia - CIT(Appeals) observed that the addition cannot be sustained for the reason that assessee is maintaining two balance sheets, one for business and other for personal assets and liabilities - HELD THAT - The personal balance sheet is to be examined by the AO whether assessee has filed the same before the AO in earlier assessment year and in this assessment year also. However, this exercise has not been done by the CIT(Appeals). Accordingly, we remit this issue to the CIT(A) to call for a remand report from the AO and fresh decision. Unaccounted payment to P.K. Ponnuraj - addition was made by the AO based on seized material and the sworn statement of the accountant of the company being unaccounted purchase of iron ore - HELD THAT - CIT(Appeals) observed that cash payments made to Ponnuraj are reflected in the statement along with the date. The statement is supported by receipt issued by Ponnuraj of the said money in cash. Further, Shri Kirmani, the Accountant in the Fiza group in the sworn statement admitted the fact that payment is towards purchase of iron ore and same does not appear in the balance sheet of the assessee. The details in the seized documents are explanatory enough to establish that the payment has been indeed made. Therefore, the CIT(A) confirmed the addition. We do not find any infirmity in the order of the CIT(Appeals) and confirm the same. Expenditure incurred out of undisclosed income - seized material shows incurring of expenditure towards donation paid out of undisclosed income. The assessee is not able to show any material that this payment was made out of disclosed sources. Accordingly, the addition is sustained. Undisclosed purchase of property at Bayar Kanyana village - AO made the addition as undisclosed purchase of property, based on the documents impounded from the premises of M/s. Mumtaz Traders - HELD THAT - CIT(Appeals) on perusal of sale deeds and the impounded material was of the opinion that the total land recorded is at ₹ 10,52,750 which matches with the amounts in the sale deed. The impounded material mentions the Sy.No. and the village for which the payments are made and these are recording of unaccounted money and cannot be brushed aside in view of the fact that there is clear mention of the fats leading to the purchase of property. The total purchase value is ₹ 21,22,014 of which is ₹ 10,52,750 is already accounted. The assessee could not bring any evidence to the contrary. He therefore sustained the addition of ₹ 10,69,264. In our opinion, whether the amount of ₹ 10,52,750 has been recorded already or not has to be examined with reference to material available on record, after calling for a remand report from the AO. Accordingly, we remit this issue to the CIT(Appeals) for fresh decision. Investment from unexplained sources on account of additional capital - AO added these amounts being additional capital shown in individual balance sheet and in the balance of Mangalore Lime Marine Industries where assessee is a partner respectively - HELD THAT - The assessee filed the balance sheets at the fag end of assessment. However it was not verified by the AO or the CIT(Appeals) in proper perspective. Accordingly, we set aside the order of the CIT(Appeals) on this issue and remit the issue to the CIT(Appeals) to decide the issue afresh after calling for comments from the AO.

Summary

Issues Involved:
1. Deletion of addition of ?3 crores on account of unexplained investment in property.
2. Deletion of ?15,60,000 on account of interest on cash loan.
3. Deletion of ?2.50 crores in respect of non-refundable deposit from Godrej Properties.
4. Deletion of ?6 lakhs on account of investment in property at Kanyana Village.
5. Deletion of ?75,335 being peak credits in unaccounted bank accounts.
6. Deletion of ?37 lakhs being advance paid to Shantiniketan property.
7. Deletion of ?51,22,605 on account of unexplained credit in the name of Shri Moideen Bawa.
8. Deletion of ?9,92,00,000 in respect of unexplained loan from Sri Aboobakar, Steel Rage, and Surya Industries.
9. Deletion of ?1,61,91,389 on account of unexplained investment in property in the name of Mrs. A.K. Fouzia.
10. Sustaining addition of ?30 lakhs as unaccounted payment to P.K. Ponnuraj.
11. Addition of ?8 lakhs as Zakath expenditure incurred out of undisclosed income.
12. Addition of ?10,69,264 on account of undisclosed purchase of property at Bayar & Kanyana village.
13. Addition of ?28,13,710 and ?5,25,000 as investment from unexplained sources on account of additional capital.

Detailed Analysis:

1. Deletion of Addition of ?3 Crores on Account of Unexplained Investment in Property:
The CIT(Appeals) deleted the addition of ?3 crores by referencing a previous order for AY 2007-08. However, the Tribunal noted that the CIT(Appeals) did not provide sufficient evidence that the sources of investment were the same as those considered in the previous order. Consequently, the issue was remitted back to the CIT(Appeals) for a fresh decision after obtaining a remand report from the AO.

2. Deletion of ?15,60,000 on Account of Interest on Cash Loan:
The AO made the addition based on seized material showing entries of interest payment. The CIT(A) deleted the addition, citing that the seized material was not supplied to the assessee. The Tribunal, however, upheld the addition, stating that the seized material was valid and the assessee failed to rebut the presumption under section 292C of the Act.

3. Deletion of ?2.50 Crores in Respect of Non-Refundable Deposit from Godrej Properties:
The AO treated the amount as income, while the CIT(A) deleted the addition, stating it was already accounted for under 'misc. income'. The Tribunal remitted the issue to the CIT(Appeals) to call for a remand report from the AO and decide afresh.

4. Deletion of ?6 Lakhs on Account of Investment in Property at Kanyana Village:
The CIT(Appeals) deleted the addition, noting it would result in double taxation. The Tribunal remitted the issue back to the CIT(Appeals) for fresh examination after obtaining a remand report from the AO.

5. Deletion of ?75,335 Being Peak Credits in Unaccounted Bank Accounts:
The CIT(A) deleted the addition based on daily cash balance statements. The Tribunal remitted the issue back to the CIT(Appeals) for fresh consideration, requiring the assessee to prove that earlier withdrawals were used for redeposits.

6. Deletion of ?37 Lakhs Being Advance Paid to Shantiniketan Property:
The CIT(A) deleted the addition, observing that the payments were reflected in the balance sheet and made through banking channels. The Tribunal remitted the issue back to the CIT(A) to call for a remand report from the AO and decide afresh.

7. Deletion of ?51,22,605 on Account of Unexplained Credit in the Name of Shri Moideen Bawa:
The CIT(A) deleted the addition, stating the advances were on behalf of the assessee. The Tribunal remitted the issue back to the CIT(A) for further examination and a remand report from the AO.

8. Deletion of ?9,92,00,000 in Respect of Unexplained Loan from Sri Aboobakar, Steel Rage, and Surya Industries:
The CIT(A) deleted the additions based on fresh evidence not confronted to the AO. The Tribunal remitted the issue back to the CIT(A) to confront the evidence to the AO and decide afresh.

9. Deletion of ?1,61,91,389 on Account of Unexplained Investment in Property in the Name of Mrs. A.K. Fouzia:
The CIT(A) deleted the addition, observing that the total investment was explained through personal and business balance sheets. The Tribunal remitted the issue back to the CIT(A) to examine the personal balance sheet and call for a remand report from the AO.

10. Sustaining Addition of ?30 Lakhs as Unaccounted Payment to P.K. Ponnuraj:
The CIT(A) confirmed the addition based on seized material and the sworn statement of the accountant. The Tribunal upheld the CIT(A)'s decision.

11. Addition of ?8 Lakhs as Zakath Expenditure Incurred Out of Undisclosed Income:
The CIT(A) sustained the addition, noting the assessee could not show that the payment was made from disclosed sources. The Tribunal upheld the CIT(A)'s decision.

12. Addition of ?10,69,264 on Account of Undisclosed Purchase of Property at Bayar & Kanyana Village:
The CIT(A) sustained the addition based on impounded material. The Tribunal remitted the issue back to the CIT(A) for fresh examination and a remand report from the AO.

13. Addition of ?28,13,710 and ?5,25,000 as Investment from Unexplained Sources on Account of Additional Capital:
The CIT(A) confirmed the additions due to lack of supporting documents from the assessee. The Tribunal remitted the issue back to the CIT(A) for fresh consideration after calling for comments from the AO.

Interest u/s. 234A, 234B & 234C:
These are consequential and mandatory.

Conclusion:
Both the revenue's and assessee's appeals are partly allowed for statistical purposes.