2022 (10) TMI 224 - AT - Income Tax

Validity of the proceedings u/s 153A - Warrant issued in name of assessee - HELD THAT - A perusal of the warrant of authorization clearly shows the name of the assessee. Similarly, the copy of the Panchnama also clearly mentions the name of the assessee. Therefore, once the name of the assessee is mentioned in the copy of the search warrant and in the copy of the Panchnama, the argument for the assessee that the CIT (A) is not justified in confirming the action of the AO in initiating proceedings u/s 153A of the Act is misconceived and therefore, the same is liable to be dismissed. We accordingly dismiss the ground raised by the assessee on this issue. Addition on account of cash receipts - HELD THAT - We find in appeal, CIT (A) sustained the addition on the ground that despite a period of 2 years from the date of search till the date of completion of assessment proceedings, the assessee could not offer any satisfactory explanation and the assessee during the course of search had himself declared additional income of Rs.15.00 crores. As the submission of the learned Counsel for the assessee that it is not an un-accounted receipt but the same is on account of sale of land and the assessee has claimed such receipt as exempt income. Further, in absence of maintenance of any books of account by the assessee no addition u/s 68 can be made. It is also his submission that although admission is an important piece of evidence but the same is not conclusive. Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. vs State Of Kerala And Anr. 1971 (9) TMI 64 - SUPREME COURT has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It has been held that it is open to the person who made the admission to show that it is incorrect. We find the assessee in the instant case in the return of income filed by him, has claimed an amount as exempt on account of sale of agricultural land. Therefore, we find some force in the argument of the learned Counsel for the assessee that the same cannot be treated as unexplained cash receipts, However, the alternate contention of the learned Counsel for the assessee that the same can be treated as capital gain and due indexation benefit be allowed is acceptable. We, therefore, deem it proper to restore the issue to the file of the Assessing Officer with a direction to consider the amount of receipt by the assessee as sale proceeds of a capital asset and allow consequential indexation benefit of the cost of the asset and determine the long-term capital gain after verifying the details. Needless to say, that the Assessing Officer while deciding the issue shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The ground raised by the assessee is allowed for statistical purposes. Unexplained cash receipts - HELD THAT - A perusal of the seized document placed clearly shows that this is the a/c of Shri Pujala Mahesh Babu as on 31.5.2011 with Shri T. Jangaiah. The total of the first three entries i.e., Rs.15,90,000/-, Rs.30,00,000 and Rs.5,00,000/-comes to Rs.51,86,000). The first amount is again received by cheque, whereas the subsequent entries are received in cash. Further, the fourth entry shows that an amount of Rs.15,00,000 was returned by cheque and other amounts were returned by cash. Thus, the account is squared up during the year itself. Further, the assessee does not maintain any books of account. Therefore, the addition of the same u/s 68 in our opinion, is not called for. However, when the assessee is undertaking certain transactions with one Shri T. Jangaiah and he was engaged in the business of real estate therefore, he must have earned some income. Since the total amount of receipts including the cheque receipt is amounting to Rs.51,80,000/- therefore, profit @ 10% of the addition of Rs.51,80,000/- as against Rs.51,80,000/- made by the Assessing Officer and sustained by the learned CIT (A), in our opinion, will meet the ends of justice. We hold and direct accordingly. Ground of appeal No.5 raised by the assessee is accordingly partly allowed. Unexplained investment in lands at Indrakaran Village on the ground that the assessee was unable to explain the source of the above investments - HELD THAT - No infirmity in the order of the learned CIT (A) on this issue. Admittedly, the assessee could not explain the source of such investment. Further, as mentioned earlier, this land was purchased during the year itself and the onus was on the assessee to explain the source of such investment. Merely stating that the assessee has sufficient funds will not absolve the assessee from his responsibilities especially when no cash flow statement was filed to explain the availability of funds and the assessee is also not maintaining any books of account. In this view of the matter and in view of the detailed reason given by the CIT (A) while sustaining the addition made by the Assessing Officer, we do not find any infirmity in the order of the learned CIT (A) on this issue. Accordingly, ground of appeal No.6 is dismissed. Addition u/s 68 - undisclosed income in absence of satisfactory explanation - HELD THAT - As entire amount cannot be added to the total income of the assessee. Since the assessee is involved in the real estate business and the entries in the books of account do not indicate whether it is in the nature of money received for purchase of land or loan etc., and the assessee has not declared any income from business, therefore, considering the totality of the facts of the case, we are of the considered opinion that the adoption of profit rate at 10% on the amount of Rs.21.00 lakhs will meet the ends of justice. We hold and direct accordingly. The ground raised by the assessee is accordingly partly allowed. Unaccounted receipts - assessee has received under the head Tulsi Bhavani Nagar, Chengicherla during the Financial Year 2012-13 but when confronted, the assessee had no reply - HELD THAT - Assessing Officer cannot make the addition of both the receipts and payments. If the amount of Rs.81,25,000/- is considered as expenditure and Rs.56.00 lakhs as receipts, then the difference comes to Rs.25,25,000/-. Since the assessee has already disclosed an amount of Rs.22,07,990/- as profit from the said project, therefore, in our opinion, the addition of the difference amount being Rs.3,17,010/- under the fact and circumstances of the case can only be made which will meet the ends of justice. We, therefore, modify the order of the learned CIT (A) on this issue and direct the Assessing Officer to restrict the addition to Rs.3,17,010/- as against addition of Rs.81,25,000/- plus Rs.56,00,000/-. The ground raised by the assessee is accordingly partly allowed. Unaccounted expenditure - HELD THAT - CIT (A) without verifying the fact has sustained the addition. Since the entry in the seized document clearly mentions the date as 20.07.2013 which pertains to A.Y 2014-15, therefore, the learned CIT (A) in our opinion, is not justified in sustaining the addition of Rs.12.00 lakhs in the A.Y 2013-14. Accordingly, the same is directed to be deleted. For remaining amount accept the alternate contention of the assessee that out of the remaining amount of Rs.42,80,000/-, only 30% of the same being the share of the assessee as mentioned can be added which comes to Rs.12,84,000/-. So far as the addition of Rs.10,00,000/- is concerned, the learned Counsel for the assessee could not give any satisfactory explanation for which the same has to be sustained. We, therefore, set aside the order of the learned CIT (A) and direct the Assessing Officer to restrict the addition to Rs.22,84,000/- (i.e. Rs.12,84,000 Rs.10,00,000) as against Rs.12,10,000, Rs.10,00,000/- and Rs.49,90,000/- respectively. The ground raised by the assessee is accordingly partly allowed. Disallowance of agricultural income - HELD THAT - Since the assessee in the instant case failed to substantiate with evidence to the satisfaction of the revenue authorities and to our satisfaction that the income so derived is on account of the agricultural land which was used for agricultural activity, therefore, the order of the learned CIT (A) in our opinion is fully justified. Accordingly, ground raised by the assessee is dismissed. Recomputation of capital gain - HELD THAT - We do not find any infirmity in the order of the CIT (A) in directing the Assessing Officer to recompute the capital gain after reducing the cost of acquisition from the sale proceeds - DR could not point out any error in the order of the learned CIT (A) on this issue. We, therefore, uphold the order of the learned CIT (A) and direct the Assessing Officer to recompute the capital gain after reducing the cost of acquisition from the sale proceeds after due verification. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee while deciding the issue. We hold and direct accordingly. Ground of appeal No.9 by the assessee and ground of appeal by the Revenue are accordingly allowed for statistical purposes. Addition u/s 68 - HELD THAT - We find the AO in the instant case made addition being the cash deposit in the Bank A/c maintained with Kotak Mahindra Bank on the ground that the assessee could not substantiate with evidence to his satisfaction that these cash deposits were business receipts. We find the CIT (A) deleted the addition the reasons of which have already been reproduced in the preceding paragraph. We do not find any infirmity in the order of the learned CIT (A) on this issue. Since the assessee in the original return of income had declared business income and since all the receipts and the business income have already been taxed, therefore, we do not find any infirmity in the order of the CIT (A) in deleting the addition in absence of any contrary material brought to our notice. Accordingly, the order of the learned CIT (A) is upheld and the ground raised by the revenue is dismissed. Unexplained cash credits - HELD THAT - Since the Assessing Officer has accepted the cheque amount received from Shri Brahmanna for the Bodupal venture, where his share is mentioned at 20% in the seized documents itself, therefore we find force in the argument of assessee that the balance amount also received in cash from Shri Brahmanna towards his 20% share could not be added as income of the assessee. We therefore, set aside the order of the learned CIT (A) and direct the Assessing Officer to delete the addition. Unaccounted expenditure - HELD THAT - First addition we find the same is based on the seized document which is a cash receipt dated 20.01.2014 and it is received from one Mr. Sudhakar S/o Late Shri N. Venkatesh. The receipt is also towards sale of agricultural land situated at Bodupal in Ghatkeswar Mandal in Ranga Reddy District. It is the submission of the learned Counsel for the assessee that the said amount is received by one Mr. N. Sudhakar from one Mr. R. Brahmanna Goud for purchase of agricultural land and therefore, this cannot be added to the total income of the assessee. However, the assessee has not explained who is Mr. N. Sudhakar and as to whether he is an employee or agent. It is also not known as to why this receipt was found from the premises of the assessee. Therefore, the submission of the learned Counsel for the assessee that since it was issued by Mr. N.Sudhakar, the addition cannot be made in the hands of the assessee cannot be accepted. The order of the learned CIT (A) sustaining this addition is accordingly upheld. For second addition submission of assessee that it represents only the working and no information is available that the assessee has received the amount of Rs.25.00 lakhs from Sri Sudhakar or from anyone. However, we do not find any merit in the above argument of the learned Counsel for the assessee in absence of any satisfactory explanation. Therefore, the order of the CIT (A) sustaining the addition made by him so is upheld. Undisclosed receipts - HELD THAT - A perusal of the copy of the return of income filed by the assessee shows that the assessee has declared sale considerationbeing 1/5th in the sale of land at Marepally, Ghatkesar Mandal, Hyderabad. After deducting the purchase cost of Rs.75.00 lakhs, the assessee has declared profit of Rs.21,30,654/- which is not disputed by the Assessing Officer in the assessment order. Since the Assessing Officer himself has accepted capital gain therefore, again making the addition for the same seized document, in our opinion, is not justified. Therefore, we set aside the order of the learned CIT (A) and direct the Assessing Officer to delete the addition. Accordingly, this ground raised by the assessee is allowed.

Summary

Issues Involved:
1. Validity of proceedings under Section 153A.
2. Addition of cash receipts as undisclosed income.
3. Addition of unexplained cash receipts.
4. Addition of unexplained expenditure.
5. Computation of capital gains.
6. Levy of interest under Sections 234A(3) and 234B(3).

Detailed Analysis:

1. Validity of Proceedings under Section 153A:
The assessee challenged the validity of the proceedings under Section 153A, arguing that a search was not contemplated in his case. However, the Tribunal found no merit in this argument, noting that the assessee's name appeared in the search warrant and Panchnama. Consequently, the Tribunal dismissed this ground, confirming the initiation of proceedings under Section 153A.

2. Addition of Cash Receipts as Undisclosed Income:
- Rs.1,07,35,000/-: The Tribunal noted that the assessee had admitted additional income during the search and failed to provide satisfactory explanations during assessment proceedings. However, the Tribunal accepted the alternate contention that the amount could be treated as capital gains, allowing indexation benefits and directing the AO to verify and compute the long-term capital gain.
- Rs.51,80,000/-: The Tribunal found that the seized document indicated that the amount was received and repaid during the year. The Tribunal held that while the entire amount could not be added, a profit rate of 10% on the amount should be applied, resulting in a partial allowance of the ground.
- Rs.25,87,000/-: The Tribunal upheld the addition as the assessee failed to explain the source of investment, noting that merely stating sufficient funds were available was insufficient without a cash flow statement.

3. Addition of Unexplained Cash Receipts:
- Rs.2,89,38,000/-: The Tribunal found an error in the AO's calculation, noting that Rs.1,06,44,000/- was added twice. The Tribunal directed the deletion of the duplicated amount and accepted the argument that the remaining amount represented sale consideration already declared in the return, thus deleting the entire addition.
- Rs.12,50,000/-: The Tribunal applied a profit rate of 10% on the amount, as the assessee claimed it was an advance for a property acquisition that did not materialize.
- Rs.94,50,000/-: The Tribunal accepted that only 40% of the amount should be added, as per the seized document indicating the assessee's share.
- Rs.1,55,00,000/-: The Tribunal found that the amount related to a co-investor's share in a venture and directed the deletion of the addition.

4. Addition of Unexplained Expenditure:
- Rs.55.60 lakhs: The Tribunal directed the AO to allow set-off against any sustained addition of unaccounted receipts.
- Rs.197.90 lakhs: The Tribunal upheld the addition but allowed set-off against sustained additions of unaccounted receipts.
- Rs.1.00 lakh: The Tribunal deleted the addition, noting the assessee's declared income and the availability of funds.
- Rs.43.32 lakhs: The Tribunal deleted the addition, noting the lack of basis for the AO's computation.

5. Computation of Capital Gains:
- Rs.78,11,904/-: The Tribunal remanded the issue to the AO to verify the purchase cost of Rs.78,11,904/- claimed by the assessee and to recompute the capital gain after due verification.

6. Levy of Interest under Sections 234A(3) and 234B(3):
The Tribunal noted that the levy of interest under Sections 234A(3) and 234B(3) is mandatory and consequential in nature, thereby dismissing the related grounds.

Conclusion:
The Tribunal partly allowed the appeals filed by the assessee, directing the AO to make specific verifications and computations, while dismissing the appeal filed by the Revenue. The Tribunal's directions focused on ensuring accurate computation of income and capital gains based on verified evidence and allowing set-offs where appropriate.