2022 (8) TMI 1026 - AT - Income Tax

Addition u/s 68 - proof with documentary evidences - rental receipts received were deposited in cash in Hyderabad - HELD THAT - A perusal of the computation of income filed by the assessee in the paper book shows that the assessee has declared the income from house property on the basis of annual lettable value and not on actual rent receipt. Therefore, when the assessee failed to file the details of rent receipts and the names of the tenants etc., the CIT (A) without verifying the contents of the remand report accepted the claim of the assessee regarding availability of cash as available for deposit in the Bank A/c which, in our opinion, is not justified. Similarly, the explanation of the assessee as available for deposit in the Bank A/c out of the accumulated cash was also not properly verified by the learned CIT (A) especially when the assessee in his balance sheet is showing cash in hand and cash balance differently. In our opinion, the matter requires a revisit to the file of the learned CIT (A) to decide as to how rent declared on the basis of annual lettable value can be available for cash deposit in the Bank A/c especially when the assessee is showing rent receivable at nil. Since the reasoning given by the CIT (A) while deleting both the additions are cryptic and merely based on the submissions filed by the assessee, therefore, considering the totality of the fact of the case and in the interest of justice, we deem it proper to restore the issue to the file of the CIT (A) with a direction to adjudicate the issue afresh after going through the computation of total income filed by the assessee for the impugned A.Y. CIT (A) shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds of appeal No. 1 2 are accordingly allowed for statistical purposes. Addition u/s 69B read with 115BBE - unexplained investment - HELD THAT - Receipt of money from one company through banking channel, in our opinion, does not absolve the assessee from proving the three ingredients i.e., identity capacity of the creditor and genuineness of the transaction. In the instant case, it is not stated as to why the MOU was not filed before the Assessing Officer and what was the reason for Mr. K. Venkatanarayana to transfer the money to the two companies which in turn has been transferred to the account of the assessee instead of directly giving the amount to the assessee. CIT (A) in the instant case has failed to go into these issues. We find the CIT (A), in the instant case, without appreciating the observations made by the AO in the remand report deleted the addition merely on the ground that the amount was transferred through proper banking channel without ascertaining the creditworthiness of the two companies and Mr. K. Venkatanarayana - we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to re-adjudicate the issue. CIT (A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law - ground raised by the Revenue is accordingly allowed for statistical purposes.

Issues Involved:
1. Deletion of addition under Section 68 of Rs. 40,50,000.
2. Deletion of addition under Section 69B of Rs. 5,14,62,561.
3. General grounds.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of Rs. 40,50,000:
The assessee filed a return of income for A.Y. 2016-17, declaring Rs. 29,56,260. During the assessment, the Assessing Officer (AO) found cash deposits of Rs. 44,90,000 in the assessee's bank accounts and questioned the source. The assessee claimed the deposits were from rental income (Rs. 26,87,500), withdrawals from other banks (Rs. 4,40,000), and accumulated cash balance (Rs. 10,21,000). The AO accepted the bank withdrawals but rejected the rental income and accumulated cash balance, adding Rs. 40,50,000 under Section 68.

Upon appeal, the CIT (A) deleted the addition, noting that the rental income was offered to tax and the accumulated cash balance was reflected in the previous year's return. The CIT (A) found the assessee's explanation satisfactory, considering the opening cash balance of over Rs. 1 crore.

The Tribunal, however, found merit in the Revenue's argument that the CIT (A) did not verify the rental receipts or tenant details and relied merely on the assessee's submissions. The Tribunal remanded the issue back to the CIT (A) for a fresh adjudication, emphasizing the need for proper verification of the rental income and accumulated cash balance.

2. Deletion of Addition under Section 69B of Rs. 5,14,62,561:
The AO noted a significant increase in the assessee's capital account, from Rs. 1,36,36,127 to Rs. 12,68,81,350, and questioned the source of this increase. The assessee explained that the increase was due to personal assets and liabilities being accounted for, including the purchase of a property and two cars. The AO treated Rs. 5,14,62,561 as unexplained investments under Section 69B.

The CIT (A) partly upheld the AO's addition, sustaining Rs. 14,00,000 but deleting Rs. 4,18,18,311, based on additional evidence and explanations provided by the assessee, including unsecured loans from two companies. The CIT (A) found the loans to be genuine and reflected in the financials of the respective companies.

The Tribunal found discrepancies in the CIT (A)'s findings, noting that the assessee failed to provide a crucial MOU and did not establish the creditworthiness of the lender, Mr. K. Venkatanarayana. The Tribunal observed that the CIT (A) did not adequately verify the transactions and remanded the issue back for a detailed examination, directing the CIT (A) to consider the identity, capacity, and genuineness of the transactions.

3. General Grounds:
The Tribunal dismissed the general grounds raised by the Revenue as they were not specific.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, remanding both primary issues back to the CIT (A) for a fresh adjudication with proper verification and consideration of all relevant facts and evidence. The order emphasized the need for thorough scrutiny and adherence to legal standards in determining the sources of income and investments.

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