2022 (6) TMI 769 - AT - Income Tax

Undisclosed investment in land in the name of spouse - HELD THAT - We have heard both the parties and perused material on record. Assessee has not placed any evidence on record to show that the above amount was duly accounted in the books of account of the assessee. As such, it is to be considered as amount of Rs.24,09,135 is unaccounted transaction carried out by assessee. The same was sustained by the CIT(A) and we do not find any infirmity in the action of the lower authorities. The same is confirmed. This ground of appeal assessee is dismissed. Validity of digital evidence procured during the course of search action - Whether CIT(A) is correct in accepting the ground of validity of digital evidence based on VC Shukla case 1998 (3) TMI 675 - SUPREME COURT rendered in 1998 however, the same has been overridden by provision of Information Technology Act 2000 and Section 2(22AA) of the I.T. Act and Section 292C of the IT Act? - HELD THAT - As the judgment in the case of V.C. Shukla (supra) is not in relation to Income-tax Act, it was relating to criminal proceedings and there was no application of section 292C of the I.T. Act in that case. In Income Tax proceedings, strict rule of evidence is not applicable as rightly pointed out by the ld. DR. The CIT(A) should not have placed reliance on the above judgment and he should have independently examined each seized material and ought to have decided the issue on the basis of weightage of those evidence. Accordingly, this ground of revenue Allowed. Undisclosed investment in site at Ramanahalli - AO made addition being undisclosed investment at Ramanahalli based on digital evidence. This amount has been invested in purchasing a site at Ramanahalli, which is the farm house in which assessee is residing - HELD THAT - In this case, there is a seized material in form of CD recovered from the assessee s place and it is the duty of assessee to explain the contents therein. However, the assessee failed to discharge the burden cast upon him.On the other hand, the plea of the assessee is that there was no corroborative material in the hands of AO to make such addition. Also the addition is made in the hands of Smt. Pallavi Ravi substantively. In our opinion, if the addition is sustained in the hands of Smt. Pallavi Ravi, there cannot be any addition in the hands of the assessee on this unexplained investment. The issue is required to be verified at the end of the AO whether there is any addition sustained in the hands of Smt. Pallavi Ravi and to decide thereupon. Accordingly, the issue is remitted to the AO for fresh consideration. Unexplained cash deposits - AO noticed huge cash deposits into the bank account of the assessee and sought explanation which are not satisfactory - HELD THAT - CIT(A) deleted the addition on the reason that assessee has shown income at Rs.97,85,000 and that is sufficient to deposit cash to bank account. In our opinion, on the basis of gross receipt, the addition cannot be deleted and he must have seen the cash/fund flow statement of assessee for the relevant financial year before deleting the addition and accordingly we remit this issue to the file of AO with a direction to the assessee to explain the cash deposits in the bank account by producing the complete cash flow statement / fund flow statement for the relevant financial year. On that basis, the AO has to decide the issue afresh. Undisclosed Election related receipts - AO based on the data retrieved from CD found at the residence belonging to Smt. Pallavi Ravi, has brought amounts to tax holding the same to be undisclosed election Receipts - HELD THAT - The addition is made by AO on the basis of CD found in the premises of assessee. However, the CIT(A) placed reliance on the judgment of V.C. Shukla (supra) and deleted addition by passing very cryptic order. In our opinion, it is appropriate to remit the issue back to the file of AO to examine the issue in the light of each independent evidence brought on record by way of seized material and decide the issue afresh. Unexplained miscellaneous Receipts - HELD THAT - There should be independent seized material to sustain the addition. If there is only uncorroborative entry in the CD, it cannot be basis for addition. The AO has to establish the live link between CD and other collateral evidence collected during the course of search action. Accordingly, the issue is remitted to the AO for fresh consideration and decision. Disallowance of expenses claimed as deduction u/s 57 - CIT(A) computed profit from this transaction @ 20% and restricted the addition - HELD THAT - CIT(A) estimated income @ 20% of the gross turnover which itself is very high as compared to the nature of business carried out by the assessee. Accordingly, we do not find any infirmity in the findings of CIT(A) and same is confirmed. Addition of loan - assessee has shown these loans in its statement of affairs. According to AO, assessee has not proved the receipt of this loan amount - DR submitted that the assessee has not proved the credit worthiness of the transaction and prayed that addition is to be sustained - HELD THAT - In this case, the CIT(A) observed that the lender is an income tax assessee and capacity to lend the money to assessee. Being so, there is no infirmity in the order of CIT(A). The same is confirmed. This ground of appeal of the revenue in both the AYs is dismissed. Disallowance of depreciation claim on JCB - Assessee claimed depreciation on JCB which was let out on hire - assessee not able to produce the bills and the depreciation is denied - CIT(A) allowed depreciation by observing that assessee has let out the same on hire and offered income from same to tax - HELD THAT - As in all this four assessment years, i.e. 2009-10 to 2012-13, the assessee claimed depreciation without proving the ownership of the JCB. U/s. 32 of the Act, the assessee has to prove the ownership of the asset and usage of the same for the purpose of business. In the present case, assessee has not produced the valid invoices for purchase of JCB or registration documents. Accordingly, we remit this issue to the AO for fresh consideration. Undisclosed income from sale Of property - CIT(A) remitted the issue to the file of AO to verify whether asset sold is not a capital asset u/s. 2(14) of the Act, whether land is long term capital asset or not and allowance for cost and indexation if applicable - HELD THAT - In this case, the CIT(A) only remitted the issue to AO for fresh consideration, though he has no power to remit the issue to the AO for fresh consideration. In our opinion, the issue has to be examined at the end of the AO. As such, he should have called for the remand report to decide himself. Instead of this, he remitted the issue to the AO for fresh consideration. We vacate that findings of CIT(A) and remit the issue to the file of AO for de novo consideration. Undisclosed Investment in land - HELD THAT - In our opinion, on the basis of gross receipt from sale of agricultural land, the addition cannot be deleted and he must have seen the cash/fund flow statement of assessee for the relevant financial year before deleting the addition and accordingly we remit this issue to the file of AO with a direction to the assessee to explain the payment of sale proceeds to various parties by producing the complete cash flow statement / fund flow statement for the relevant financial year. On that basis, the AO has to decide the issue afresh. Unsubstantiated liability - HELD THAT - We have heard both the parties on the issue. In our opinion, the assessee has to reconcile the assessee account with Conc Shade Constructions P. Ltd. Accordingly the issue is remitted to the AO for fresh consideration. Undisclosed investment Residential house in Basavanahalli - HELD THAT - CIT(A) deleted addition in wholesome manner by passing cryptic order without going through the actual seized material. In our opinion, the issue to be examined by AO by co-relating the seized material to the investment made by the assessee in the residential house in Basavanahalli. Accordingly, in all these 3 AYs, the issue is remitted to the AO for fresh consideration. Alleged income arising of undisclosed sale os stone crusher unit and hot mix unit - HELD THAT - CIT(A) deleted the addition only on the proposition that jelly movement register is a record for movement of tar mixed jelly and pure jelly. Tar mixed jelly is used in the business of sister concern, Conc Shade Constructions P. Ltd. There is no basis for such conclusion and also his finding is contradictory in nature as he observed that only gross profit to be taxed in A.Y. 2008-09. However, in the A.Y. 2011-12 he deleted the addition. Hence, we vacate his findings and remit the issue to the file of AO with a direction to assessee to establish how the undisclosed turnover is not relating to his business and it is disclosed in the books of accounts of sister concern. Thereafter the AO has to decide the issue accordingly. Profits from contract receipts - AO mentioned in his order that assessee did not produce books of account and relevant vouchers in support of income declared from his contract business - HELD THAT - The plea of the assessee is that the assessee is maintaining regular books of accounts and it was subject to audit u/s 44AB of the Act. In view of this, the assessee s income has to be computed as per books of accounts subject to verification. Further, the assessee is entitled for depreciation on assets if the conditions laid down u/s 32 of the Act were satisfied. Accordingly, this issue is remitted to AO for fresh consideration in accordance with law. Unconfirmed liability - CIT(A) deleted the addition holding that the income has been estimated @ 8% on a substantive basis - HELD THAT - The main grievance of the department is that assessee has not produced the books of account so as to compute the income. In our opinion, the issue to be examined by AO after going through books of account. Accordingly issue is remitted to AO with a direction to assessee to produce books of accounts. Thereafter AO has to decide the issue afresh in accordance with law. Unexplained expenses - addition of expenses payable on the reason that there is no confirmation from the concerned parties - HELD THAT - The main grievance of the department is that assessee has not produced the books of account so as to compute the income. In our opinion, the issue to be examined by AO after going through books of account. Accordingly issue is remitted to AO with a direction to assessee to produce books of accounts. Thereafter AO has to decide the issue afresh in accordance with law and there cannot be any double addition one as sundry payables and other as sundry creditors. Undisclosed loan advances - AO relying solely upon the contents of an excel Sheet to make the addition - HELD THAT - The addition is deleted by CIT(A) there is no corroborative evidence to support the addition. However, this finding is not based on the examination of the seized material. The AO has to examine the parties concerned and confront the same to the assessee. Thereafter he shall decide the issue afresh in accordance with law. Accordingly the issue is remitted to AO for fresh consideration. Cash deposit in Name of Benami - HELD THAT - CIT(A) deleted the addition on the basis of submission of assessee without calling for comments from the AO. In our opinion, it is appropriate to remit the issue to AO to examine the books of account along with the bank account and decide the issue accordingly. Undisclosed contract receipts - HELD THAT - CIT(A) in certain years estimated income @ 20% and in this AY he estimated 8% which are contradictory. In our opinion, to meet the ends of justice, it is appropriate to remit the issue to the file of AO to decide the issue after examining books of accounts. Undisclosed Investment - AO has then come to infer that the Assessee had a modus operandi where he would enter into agreements thro Anil Kumar and finally purchase the property by a sale deed made directly from the concerned vendor - HELD THAT - The addition made cannot be made u/s 153 A in as much the same is not forming part of any seized material. Further if it is gathered during the course of search conducted on another person, the same could only be added in a proceeding u/s 153C initiated separately in accordance with law and not under the present proceeding u/s 153 A. The AO is not justified in making this addition based on oral statement made by Anil Kumar, which has no evidentiary value, and which is not corroborated by any other evidence. The statement is a self-serving statement made by Anil Kumar and cannot be used to make an addition in the hands of the Assessee in the absence of any supporting and corroborating evidence. As additions cannot be made merely based on data found at the time of search in the absence of corroborative evidence. In the case on hand there is no single evidence in support of the addition. We remit the issue to the file of AO to confront the evidence collected by him to the assessee. Thereafter, he has to decide the issue afresh. Ordered accordingly.

Summary

Issues Involved:
1. Validity of digital evidence
2. Alleged undisclosed investment in properties
3. Unexplained cash deposits
4. Undisclosed election-related receipts
5. Unexplained miscellaneous receipts
6. Disallowance of expenses claimed as deduction
7. Addition of loans from K G Rajesh
8. Disallowance of depreciation claim on JCB
9. Undisclosed income from the sale of property
10. Unsubstantiated liabilities
11. Unexplained expenses
12. Undisclosed loan advance
13. Cash deposits in the name of benamis
14. Undisclosed contract receipts
15. Undisclosed investments in the name of spouse
16. Undisclosed investment with C D Anil Kumar

Issue-wise Detailed Analysis:

1. Validity of Digital Evidence:
The main grievance was whether the CIT(A) correctly accepted the validity of digital evidence based on the V.C. Shukla case. The Tribunal held that the CIT(A) should have independently examined each seized material and decided the issue based on the weightage of those evidences. The ground of revenue was allowed.

2. Alleged Undisclosed Investment in Properties:
For AY 2008-09, the Tribunal remitted the issue to the AO to verify whether the addition sustained in the hands of Smt. Pallavi Ravi and to decide accordingly. For AY 2009-10 and 2010-11, the Tribunal directed the assessee to produce a complete cash flow statement for the relevant financial year. The issue was remitted to the AO for fresh consideration.

3. Unexplained Cash Deposits:
For AYs 2008-09 to 2012-13, the Tribunal remitted the issue to the AO to examine the cash flow statement for the relevant financial year and decide accordingly.

4. Undisclosed Election-Related Receipts:
The Tribunal found that the addition was based on data retrieved from a CD found at the residence of the assessee. The CIT(A) deleted the addition relying on the V.C. Shukla case. The Tribunal remitted the issue back to the AO to examine the issue in light of each independent evidence brought on record by way of seized material.

5. Unexplained Miscellaneous Receipts:
The Tribunal remitted the issue to the AO for fresh consideration, emphasizing the need for independent seized material to sustain the addition.

6. Disallowance of Expenses Claimed as Deduction:
The Tribunal confirmed the CIT(A)'s decision to estimate income at 20% of the gross turnover, finding it reasonable compared to the nature of the business carried out by the assessee.

7. Addition of Loans from K G Rajesh:
The Tribunal confirmed the CIT(A)'s decision, noting that the lender was an income tax assessee with the capacity to lend money to the assessee.

8. Disallowance of Depreciation Claim on JCB:
For AYs 2008-09 to 2012-13, the Tribunal remitted the issue to the AO for fresh consideration, requiring the assessee to prove ownership and usage of the JCB for business purposes.

9. Undisclosed Income from the Sale of Property:
For AYs 2009-10 and 2010-11, the Tribunal vacated the CIT(A)'s findings and remitted the issue to the AO for de novo consideration.

10. Unsubstantiated Liabilities:
For AYs 2009-10 and 2011-12, the Tribunal remitted the issue to the AO for fresh consideration, directing the assessee to reconcile accounts and produce books of accounts.

11. Unexplained Expenses:
For AY 2011-12, the Tribunal remitted the issue to the AO for fresh consideration, emphasizing the need to examine books of accounts and avoid double addition.

12. Undisclosed Loan Advance:
For AY 2012-13, the Tribunal remitted the issue to the AO for fresh consideration, requiring corroborative evidence to support the addition.

13. Cash Deposits in the Name of Benamis:
For AY 2012-13, the Tribunal remitted the issue to the AO to examine the books of account along with the bank account and decide accordingly.

14. Undisclosed Contract Receipts:
For AY 2012-13, the Tribunal remitted the issue to the AO to decide after examining books of accounts.

15. Undisclosed Investments in the Name of Spouse:
For AY 2012-13, the Tribunal remitted the issue to the AO to give the assessee an opportunity to rebut the evidence collected by the department.

16. Undisclosed Investment with C D Anil Kumar:
For AY 2012-13, the Tribunal remitted the issue to the AO to confront the evidence collected by him to the assessee and decide the issue afresh.

Conclusion:
In the result, all the assessee’s appeals were dismissed, and revenue’s appeals were partly allowed for statistical purposes.