2022 (5) TMI 771 - AT - Income Tax

Assessment u/s 153A - Unexplained cash loan - assessee has not maintained any books of accounts and also failed to provide name, PAN, address of the persons with whom the loans were said to be taken - HELD THAT - On perusal of the reply of the assessee on the points raised by the AO we find no breach of provision of law once the transaction recorded on the seized paper evidently make it clear that the money so received is on account of the proposed sale of agricultural land of the assessee. The argument of the AO that the advance is subject to interest but it has no bearing on the receipt of the money so far as to its nature is concerned. Thus, merely in absence of the direct evidence the prime and important evidence cannot be put aside and the department cannot take a different view than what is written in the seized records. The seized records evidently clear, the purpose of advance, name of broker, name of person paying and the date and amount paid is clearly written. Whether this receipt of advance is income of the assessee or not? - Since, the possession of the land and transfer is not took place this advance receipt is not chargeable to tax under the Act. Now, we have to see that the law permits to receive the money in advance or not? The receipt of money in cash w.e.f. 01.06.2015 considered as specified sum under the provision of section 269SS of the act and since, the money has been received before this date this receipt of advance is also in accordance with the law. Thus, the money so received and noted on this page is not prohibited receipt in the hand of the assessee and considering the nature of the receipt the same is also not chargeable to tax. Merely, the assessee looking to the facts and circumstance expressed his inability to submit the circumstantial evidence the basic nature of transaction in absence of this information does not change its nature of receipt. When the details connected with the transaction are outside the purview of the provision of section 68 as all the circumstantial evidence found in the course of search conducted by the department proves that the money so received is an advance against the sale of agricultural land. The benefit of doubt, thus, goes in favour of the assessee so far as regard the nature of receipt is concerned as section 292C cast an obligation upon the parties that when the documents found in search the party who is alleging that the facts are different as to what has been written has to prove with an evidence that the content written on the seized paper are not correct. Thus, at this stage it is also noted after taking into consideration the receipt the subsequent page seized source is considered as money received as advance. All these seized documents confronted to the assessee during the course of search in the statement recorded, he has offered a sum of Rs. 2.Cr. based on the loose papers found during the course of search although the income consists partly of as undisclosed income and partly as agricultural income. Alternatively, once it is accepted to be a loan or advance it is a capital receipt and not a revenue receipt. Hence, on this analogy also the amount cannot be added to income as also held by CIT(A), as we find no contrary argument before us or any material brought before us by the Revenue to convince us to take a different view of the matter then the view so taken by the Ld CIT(A). Thus, we do not find any merit in this ground of appeal raised by the revenue. Agricultural income - AO contended that based on loose paper assessee has surrendered Rs. 2.00 cr as unaccounted income - On going through the bunch of evidence where in the holding of land is as much as 230 vighas are in possession and the assessee has placed on records the accounts of the agricultural income, corroborated this income with the seized bills related to these agricultural activities of the assessee. Even the ld. CIT(A) has accepted that the assessee has earned the agricultural income but has not given the benefit of exemption. We observed on looking to the size of the holding evidence showing the earning of the net agricultural income supported by an evidence to the extent cannot be considered as not proved or not genuine and thus ground of the assessee is allowed. Addition made on unexplained jewellery - assessee has not submitted any concrete evidence in support of jewellery found during the search proceedings - HELD THAT - Assessee explained and reconciled the valuables with the Wealth tax return and holding of the various family member reconciling the version of the family at the time of search. The submission of the assessee made before the Ld. CIT(A) is duly recorded on the page from 9 to 24, which is very detailed and exhaustive and was relied upon by assessee in addition to the brief submitted before us. No incriminating documents were found to proof that the assessee has made purchase out of books of the jewellery. Looking the detailed finding of ld. CIT(A) and since, the ld. DR has not placed any tangible argument that how and why the finding of the ld. CIT(A) is not correct on fact and on law, in the absence of such argument we find no reason to interfere in the finding of the Ld. CIT(A) and this ground no. 2 raised by the department in this appeal stands dismissed. Unaccounted sale of mustard seed / oil - profit estimated on account of the unexplained sales the separate disallowance u/s. 40A(3) made - HELD THAT - We confirm the action of the ld. CIT(A) that whole sale consideration cannot be added as income only the related profit can be added in the income of the assessee. As regards the estimation of profit the ld. AR of the assessee has filed the comparative rate of profit before us for two parties having substantial turnover and the profit declared by them ranging between 3.25 % to 4.56 % as G. P. On the other hand, the ld. DR has requested that as per provision of estimated profit @ 8 % in section 44AD the same may be considered instead of 10 %. Having considered the rival contentions we feel that 8 % being the rate of general rate of estimate for small assessee, whereas the ld. AR has filed the chart showing the rate of profit declared by the assessee engaged in the similar line of activity. Thus it would be the end of justice if the G. P. addition be restricted to 5 % instated of 10 % estimated by the ld. CIT(A). Thus, the ground no. 4 of the revenue is considered accordingly and the assessee got relief to the extent of 5 % and thus, this ground no. 4 of the revenue is partly allowed. Unexplained cash credits - in search proceedings certain loose papers consisting of credit entries found and the assessee could not have verified from his books of accounts - HELD THAT - AR of the assessee based on the detailed argument presented by way chart proved that the money that has been received as alleged by the AO is in fact the money that has been received back. The source of the advancing this money was the amount received on agricultural land which is already considered and thus, once the money advances sources are proved, then on receipt that money against that receipt is not subjected to tax. Therefore, this credit not attract the provision of section 68 of the Act and thus, the ld. CIT(A) has correctly deleted this addition and in the absence of any tangible material provided by the ld. DR we hold to confirm the view of the ld. CIT(A) and thus ground no. 6 raised by the department is dismissed. Addition on account of undisclosed interest income despite the fact that assessee has paid interest to various persons against the cash loan whereas assessee having cash creditors - HELD THAT - Considering the arguments of the assessee and in the absence of any tangible argument from the ld. DR stating as to why and how the addition of notional interest would survive in the light of the facts submitted before us and therefore, we have no reason to hold a different view than what has been decided by the ld CIT(A) and thus, the ground no. 7 raised by the revenue is dismissed.

Summary

Issues Involved:
1. Unexplained Cash Loan of Rs. 2.75 Crore.
2. Agricultural Income of Rs. 12,46,718.
3. Unexplained Cash of Rs. 6,02,275.
4. Unexplained Jewelry of Rs. 25,34,587.
5. Unexplained Cash Loan of Rs. 1,68,00,000.
6. Unaccounted Sales of Rs. 1,21,29,142.
7. Cash Purchases u/s 40A(3) of Rs. 1,95,06,818.
8. Unexplained Cash Credits of Rs. 1,18,63,659.
9. Undisclosed Interest Income of Rs. 14,23,639.

Issue-wise Detailed Analysis:

1. Unexplained Cash Loan of Rs. 2.75 Crore:
The department challenged the deletion of an addition of Rs. 2.75 crore made by the AO on account of unexplained cash loans. The assessee argued that the amount was an advance received against the sale of agricultural land. The CIT(A) found that since the assessee did not maintain any books of accounts, section 68 could not be invoked. The CIT(A) also noted that the amount received was a capital receipt and not a revenue receipt, thus not taxable. The Tribunal upheld the CIT(A)'s decision, stating that the seized documents clearly indicated the nature of the transaction, and the amount could not be taxed under section 68.

2. Agricultural Income of Rs. 12,46,718:
The AO added Rs. 12,46,718 as bogus agricultural income, which the assessee claimed as exempt. The CIT(A) upheld the AO's decision, stating that the assessee failed to prove the agricultural income with sufficient evidence. However, the Tribunal found that the assessee had provided adequate evidence, including Khasra Girdawari, sale statements, and affidavits, proving the agricultural income. The Tribunal allowed the assessee's appeal, recognizing the agricultural income as genuine.

3. Unexplained Cash of Rs. 6,02,275:
For the assessment year 2016-17, the AO added Rs. 6,02,275 as unexplained cash. The CIT(A) deleted the addition, stating that the assessee had provided sufficient explanation and evidence. The Tribunal upheld the CIT(A)'s decision, noting that the facts and circumstances were similar to the previous assessment year where the addition was deleted.

4. Unexplained Jewelry of Rs. 25,34,587:
The AO added Rs. 25,34,587 as unexplained jewelry found during the search. The CIT(A) deleted the addition, considering the CBDT circular and the fact that the jewelry was held collectively by the family. The Tribunal upheld the CIT(A)'s decision, noting that the jewelry found was reasonable considering the family size and status.

5. Unexplained Cash Loan of Rs. 1,68,00,000:
For the assessment year 2016-17, the AO added Rs. 1,68,00,000 as unexplained cash loans. The CIT(A) deleted the addition, stating that the assessee did not maintain books of accounts, and section 68 could not be invoked. The Tribunal upheld the CIT(A)'s decision, noting that the facts were similar to the previous assessment year where the addition was deleted.

6. Unaccounted Sales of Rs. 1,21,29,142:
The AO added Rs. 1,34,76,825 as unaccounted sales and Rs. 1,95,06,818 as disallowance under section 40A(3). The CIT(A) held that only the gross profit on unaccounted sales should be taxed and applied a 10% gross profit rate, confirming an addition of Rs. 13,47,683. The Tribunal reduced the gross profit rate to 5%, considering it reasonable based on comparable cases, and upheld the deletion of the disallowance under section 40A(3).

7. Cash Purchases u/s 40A(3) of Rs. 1,95,06,818:
The AO disallowed Rs. 1,95,06,818 for cash purchases under section 40A(3). The CIT(A) deleted the disallowance, stating that once the income is estimated by applying a gross profit rate, no further disallowance under section 40A(3) is warranted. The Tribunal upheld the CIT(A)'s decision.

8. Unexplained Cash Credits of Rs. 1,18,63,659:
The AO added Rs. 1,18,63,659 as unexplained cash credits. The CIT(A) deleted the addition, stating that the amount was not credited in the books of accounts and thus section 68 could not be invoked. The Tribunal upheld the CIT(A)'s decision, noting that the amounts were temporary advances given and received back.

9. Undisclosed Interest Income of Rs. 14,23,639:
The AO added Rs. 14,23,639 as notional interest on the unexplained cash credits. The CIT(A) deleted the addition, stating that there was no evidence of interest received by the assessee. The Tribunal upheld the CIT(A)'s decision, noting that the addition was based on presumption and not on evidence.

Conclusion:
The Tribunal dismissed the revenue's appeals and partly allowed the assessee's appeals, providing relief on various grounds, including unexplained cash loans, agricultural income, unexplained jewelry, unaccounted sales, and unexplained cash credits. The Tribunal's decisions were based on the facts, evidence, and applicable legal provisions, ensuring a fair and just outcome.