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2022 (7) TMI 1014 - AT - Income TaxUnexplained cash credits u/s. 68 - non-transfer of the shares even after 9 years from the date of receiving the advances towards sale of shares - CIT-A deleted the addition - HELD THAT - AO has not disputed the identity and has also erred in not causing any enquiry with the parties. AO concluded the assessment simply on the basis of non-transferability of the shares to the prospective investors even after nine years and considered it as a non-genuine transaction. We find from the MoU that the assessee has relinquished all its rights over the plant and has given possession to the prospective investors. The MoU terms clearly establishes that the intention of the assessee is to sell the plant to the prospective buyers and merely because of delay in transfer of shares does not entitle the Assessing Officer to treat it as unexplained cash credit U/s. 68 of the Act. We note from the records that the shares deemed to have been transferred in FY 2017-18. Assessing Officer, as rightly pointed out by the CIT(A) should have examined this aspect and should have taxed the income as capital gains in the hands of the assessee instead of treating it as unexplained investment U/s. 68. In view of the above findings, we find no infirmity in the order of the Ld. CIT(A) and we hereby direct the Assessing Officer to examine the aspect of treating the sale of shares as capital gains in the hands of the assessee. Needless to say the assessee has to be provided with one more opportunity before passing any order in accordance with law by the Ld. AO. Advances received from the sale of flats - AR submission that the project has been taken over by M/s. Aishwarya Constructions wherein the assessee is a Managing Partner and has received advances which are to be adjusted by M/s. Aishwarya Constructions as the original project supposed to be constructed by Sthira Infra Projects Pvt. Ltd, could not be executed due to pending litigation. The assessee has also submitted that since the advances paid by the prospective buyers has been taken by the assessee in its personal concern the CIT(A) has rightly directed the AO to delete the addition received as advanced from the prospective buyers. However the assessee has also admitted the fact that an amount of Rs. 11,35,000/- is pending for settlement with the prospective buyers as they could not be identified. CIT(A) has rightly disallowed the amount of Rs. 11,35,000/- which is pending for settlement and were are of the considered view that there is no infirmity in the order of the Ld. CIT(A) on this ground. Additions of Rs 45,08,000/- made during the AY 2013-14 it is observed that the assessee has produced confirmation letters from Sri BV Rao, Sri JRG Verma, Sri N. Apparao, Sri P. Kondala Rao, Sri P. Srinu and Sri Y. Balaraju as per the sale agreement executed. The Ld. AO has also confirmed that the amount was not refunded through prospective buyers by the assessee. Since the Agreement of Sale produced by the assessee confirms the intention of the buyers to buy the flats from the assessee the contention of the assessee that the identity of the creditors and the genuineness of the transaction was not proved by the assessee was not accepted. We therefore find no infirmity in the order of the Ld. CIT(A) and hence no interference is required with respect to the ground adjudicated by the Ld. CIT(A). Disallowance u/s 14A r.w.r. 8D - HELD THAT - We find from the record that the assessee has not earned any exempt income to invoke the provisions of section 14A r.w.r 8D - Various High Court and Coordinate Benches of the Tribunal have laid down the ratio that there is no requirement for disallowance U/s.14A of the Act where the assessee has not earned any exempt income. We, therefore respectfully following the judicial precedents on this issue, find no infirmity in the order of the Ld. CIT(A) and this ground raised by the Revenue is dismissed. Credit entry in the capital account of the assessee as unexplained cash credits U/s. 68 - CIT-A deleted the addition - HELD THAT - In order to match with the investments the assessee has increased the cost of investment by crediting the capital account of the assessee in the books of account. Further, it is noted that Akash Engineering and Tech Pte Ltd, Singapore is not a domestic company and provisions of section 115(O) of the Act are not applicable to the said transaction. We also find from the page 59 of the paper book that Akash Engineering and Tech Pte Ltd have confirmed issue of 1,25,000 bonus shares to the assessee during the year 2012 and also has stated that no dividend has been declared by the company to its members. We are of the considered view that the issue of bonus shares cannot partake the character of the dividend in the hands of the assessee. CIT(A) has rightly appreciated these facts and we therefore find no infirmity in the order of the Ld. CIT(A) and this ground raised by the Revenue is dismissed. Disallowing the agricultural income - HELD THAT - We find that the Ld. AR failed to produce any evidences regarding the sale of Mangoes from the said agricultural land of the assessee. In the absence of any supporting evidences regarding quantity of the Mangoes sold and expenses incurred in earning of such agricultural income, the Ld. AO has rightly disallowed the agricultural income and treated it as income from other sources. In view of the above, we find no infirmity in the order of the Ld. AO and we uphold the order of the AO on this ground and accordingly Ground raised by the Revenue is allowed.
Issues Involved:
1. Addition of unexplained cash credits under Section 68 of the Income Tax Act. 2. Deletion of addition made by treating credit entries in the capital account as unexplained cash credits. 3. Disallowance under Section 14A read with Rule 8D for expenditure related to exempt income. 4. Treatment of agricultural income as income from other sources. Detailed Analysis: 1. Addition of Unexplained Cash Credits: The Revenue challenged the deletion of additions made by treating advances for the sale of shares and flats as unexplained cash credits under Section 68 of the Income Tax Act. The assessee had received advances towards the sale of shares in M/s. Chiraditya Power Private Limited and for flats but did not transfer the shares or execute sale deeds within the stipulated time. The Ld. CIT(A) deleted the additions, accepting the assessee's explanations and additional evidence, including a Memorandum of Understanding (MoU) and confirmation letters from buyers. The Tribunal upheld the Ld. CIT(A)'s order, noting that the transaction was genuine and the delay in transfer did not justify treating the advances as unexplained cash credits. The Tribunal directed the Assessing Officer to examine the aspect of treating the sale of shares as capital gains. 2. Deletion of Addition in Capital Account: For AY 2012-13, the Revenue contested the deletion of an addition of Rs. 9,81,000/- in the capital account, which the assessee claimed was received from the sale of a flat. The Ld. CIT(A) found that the assessee had initially capitalized the cost but later reversed it and accounted for the sale as turnover. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's ground. For AY 2013-14, the Revenue challenged the deletion of an addition of Rs. 55,66,536/- in the capital account, arguing it was a colorable device to route investment returns without tax. The Tribunal found that the assessee received bonus shares, not dividend income, from a foreign company, and the provisions of Section 115(O) were not applicable. The Tribunal upheld the Ld. CIT(A)'s order, noting that the issue of bonus shares did not constitute dividend income. 3. Disallowance under Section 14A read with Rule 8D: The Revenue appealed against the deletion of disallowance of Rs. 7,90,451/- under Section 14A read with Rule 8D, arguing that disallowance was warranted even if no exempt income was earned. The Tribunal noted that various judicial precedents held that disallowance under Section 14A was not required if no exempt income was earned. The Tribunal upheld the Ld. CIT(A)'s order and dismissed the Revenue's ground. 4. Treatment of Agricultural Income: The Revenue contested the deletion of an addition of Rs. 10,00,000/-, which the assessee claimed as agricultural income. The Ld. AO treated it as income from other sources due to lack of evidence. The Tribunal found that the assessee failed to produce evidence of the sale of agricultural produce and expenses incurred. The Tribunal upheld the Ld. AO's order, treating the income as income from other sources. Conclusion: The appeals of the Revenue were partly allowed, with the Tribunal upholding the Ld. CIT(A)'s deletions of certain additions and disallowances while affirming the Ld. AO's treatment of agricultural income as income from other sources. The cross-objections filed by the assessee were supportive in nature and dismissed accordingly.
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