2023 (2) TMI 958 - AT - Income Tax

Unexplained expenditure u/s 69 - Credit cards expenses alleged as unverifiable - HELD THAT - The credit cards referred by the Assessing Officer refers to two columns, one for expenses and another for payments. So, the disallowance could have been made to the extent of payments made to credit card and not expenses incurred or credit amount from credit cards. CIT(A) has carried out due verification of payments and after that he has sustained addition of Rs. 131495/- out of Rs. 667200/- made by the Assessing Officer. However, if aggregate payments are to be considered for the year, then Rs. 654204/- needs to be considered. Since, the payments of Rs. 5,35,705/- are duly verified and stands reconciled, the differential amount of Rs. 1,18,499/- (Rs. 654204 (-) Rs. 535705), is only amount has not been explained by way sources of cheque. The Ld. Counsel of the assessee has shown year wise cash withdrawal by the assessee, which are placed on record. In our opinion, the amount of said withdrawal is sufficient to explain the source of balance amount of Rs.1,18,499/-. Accordingly, the addition on account of credit card payment is deleted. Addition u/s 68 - unexplained liabilities - Assessee failed discharge his onus to prove - HELD THAT - We find that the assessee has collected documents for discharging onus of the assessee and in most of the cases, documents have been filed. In respect of Rakesh Surve, although the assessee had filed loan confirmation, however, notice issued u/s. 133(6) of the Act had been returned unserved. In such circumstances, the Ld. AO should have made effort for verification of the same by way sending inspector from his office for verification of the party. As regards M/s. Mukund Associates from whom loan the Ld Counsel of the assessee has requested to provide one more opportunity for providing the documents in support. Thus we restore this issue of addition of Rs.43,80,000/- back to file of the AO for deciding afresh after examining documents filed by the assessee and conducting due enquires as required. Disallowance as personal expenses of the assessee - assessee has claimed certain expenses on account of motor car expenses, car loan interest, depreciation and telephone expenses - as the assessee failed to justify these expenses, the Assessing Officer disallowed 25% of these expenses - HELD THAT - We are of the opinion that the depreciation (Rs. 195,654/-) does not require any vouchers as such. Similarly, the interest on bank loan (Rs. 56,866/-) cannot be disallowed on ad-hoc basis. The Only expenses, which could be disallowed are for Motor car ( Rs. 12,500/-) and telephone expenses (Rs. 23,497/-) , but the quantum of those expenses claimed is not too high as compared to the business activity of the assessee , so same does not deserve any disallowance . Accordingly, the disallowance confirmed by the ld CIT(A) is deleted. Disallowance of interest u/s. 36(1)(iii) - bank loans are personal in nature - assessee has not furnished any evidence of advancing loan for business as contended before the AO - HELD THAT - Since the appellant earns reasonable amount of commission in the real estate deals made through him, he has to block the plots as and when he comes across some good plots and that blocking is possible only when some amount is paid as advance to the plot owners - assessee asks the intending buyers of the plots to make advance payments to the plot owners through the appellant; however, sometimes, due to urgency, when the buyers are not readily available or cannot be contacted, the assessee himself makes these advances from out of his own funds or borrowed funds. Hence, for this purpose, the assessee at times borrows money from bank and others which is utilised for purchasing plots. Considering, the nature of business of real estate agent of the assessee, the explanation given by the ld. Counsel is not unreasonable. Accordingly, we delete the addition made by the assessing officer. Unexplained expenditure u/s 69C - HELD THAT - In the facts qua the issue in dispute it is evident that assessee has merely acted as broker for Mr Madan Kolmbkar for purchase of plots from four persons and this fact has been corroborated from the seized documents and cheque payments made by the assessee. Accordingly, the addition sustained by the Ld. CIT(A) is not justified, therefore same is deleted. The ground of the appeal of the assessee is accordingly allowed. Cash/unaccounted transactions of the assessee - HELD THAT - We find that no enquiry has been made by the Assessing Officer from either the farmers are from rural land developers regarding the cash component of the transactions nor any adverse finding of investigation wing has been brought on record by the Assessing Officer- Thus addition sustained by the Ld. CIT(A) in respect of cash transactions is hereby deleted. Unexplained investment - evidence collected by the widow of the demised assessee i.e. legal heir - addition made in the assessment on account of the alleged purchase of the said flat, ONLY on the basis of a proposal which never materialized - HELD THAT - As assessee has filed additional evidence to support that said flat was never allotted to the assessee and it was merely a proposal, which never materialized. In view of the evidence collected by the widow of the demised assessee i.e. legal heir, we feel it appropriate to admit the additional evidence and restore the matter to the file of the ld. Assessing Officer for necessary verification from the relevant authorities regarding allotment of concerned flat and then decide the issue in dispute in accordance with law after providing adequate opportunity of being heard to the assessee/legal heir of assessee. Cash found during the course of the search - HELD THAT - Assessee has given undertaking that the legal heir of the assessee has agreed for collecting evidence from the banks and from the landowners to support of the availability of cash in the hands of the assessee. We are of the opinion that the interest of substantial justice one more opportunity should be allowed to the legal hair of the assessee to substantiate the source of cash found from the assessee. Accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and restore the matter back to the file of the ld. Assessing Officer for verification of the claim of the assessee. Unexplained investment in jewellery - HELD THAT - We find that in the case Cit Vs Ratanlal Vyarilal Jain 2010 (7) TMI 769 - GUJARAT HIGH COURT ; CIT(Central), Kanpur Vs M/s Ghanshyam Das Johri 2013 (10) TMI 1187 - ALLAHABAD HIGH COURT and CIT Vs Kailash Chnad Sharma 2004 (7) TMI 647 - RAJASTHAN HIGH COURT have consistently held that the position of the jewelry of the quantities specified in the instruction issued by the CBDT is reasonable and therefore should be held to be explained in the hands of the assessee and should not be subject matter of the addition by the AO on the ground that assessee was unable to explain the possession thereof to his satisfaction. In view of the above precedents, we feel it appropriate to restore the matter to the file of the Assessing Officer for allowing benefit of jewelery as per the CBDT instruction (supra) in accordance with law and also examine the claim of the assessee in respect of the balance amount of the jewelry if any out of the disclosure of Rs. 70 lakhs claimed to have been made by the assessee for assessment year 2008-09 and 200910. Accordingly, the ground of the appeal of the assessee is allowed for statistical purposes. Addition u/s 68 - HELD THAT - We are of the opinion that as far as provisions of section 68 are concerned, the assessee has dischargedhis onus by way of filing MOU between the assessee and said party. Once the assessee filed the confirmation, onus sifted to the AO and if he did not discharge his onus, the assessee cannot be faulted. Accordingly, the addition in respect of M/s Narayan Niryat India Private Limited is deleted. Regarding the amount from M/s Basant Reality, assessee has requested for one more opportunity. In the interest of the substantial justice particularly in view of the fact that assessee has already demised and being represented by his widow, we feel it appropriate to restore this issue to the file of the AO for deciding a fresh. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The ground of the appeal of the assessee is accordingly allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of unexplained expenditure under Section 69 of the Income Tax Act.
2. Addition of unexplained cash credit under Section 68 of the Income Tax Act.
3. Disallowance of personal expenses.
4. Disallowance of interest under Section 36(1)(iii) of the Income Tax Act.
5. Addition of cash received in land deals.
6. Addition of unverifiable transactions in respect of land deals.
7. Addition of unexplained expenditure under Section 69C of the Income Tax Act.
8. Addition based on loose papers indicating unaccounted/undisclosed income.
9. Addition of unexplained money found during search.
10. Addition of unexplained investment in jewelry.
11. Disallowance of donation under Section 80G.

Issue-wise Detailed Analysis:

1. Addition of Unexplained Expenditure under Section 69:
The assessee was asked to furnish details of credit card payments. The Assessing Officer (AO) found certain credit card transactions not disclosed by the assessee and added Rs. 6,67,200/- as unexplained expenditure. The Commissioner of Income Tax (Appeals) [CIT(A)] verified payments and reduced the addition to Rs. 1,31,495/-. The Tribunal deleted the entire addition, noting that the cash withdrawals justified the balance amount.

2. Addition of Unexplained Cash Credit under Section 68:
The AO added Rs. 6,70,30,000/- as unexplained liabilities, including amounts from Rakesh Surve and Shree Mukund Associates. The CIT(A) called for a remand report and deleted Rs. 6,26,50,000/- but upheld Rs. 43,80,000/-. The Tribunal restored the issue to the AO for fresh examination, noting the need for further verification.

3. Disallowance of Personal Expenses:
The AO disallowed 25% of motor car expenses, car loan interest, depreciation, and telephone expenses, totaling Rs. 61,309/-. The CIT(A) upheld the disallowance. The Tribunal deleted the disallowance, stating that the quantum of expenses was not high compared to the business activity.

4. Disallowance of Interest under Section 36(1)(iii):
The AO disallowed Rs. 16,19,127/- as the loans were deemed personal. The CIT(A) confirmed the disallowance. The Tribunal deleted the addition, accepting the explanation that the loans were used for business purposes.

5. Addition of Cash Received in Land Deals:
The AO added Rs. 3,50,00,000/- as unaccounted cash based on seized documents. The CIT(A) restricted the addition to Rs. 55,00,000/-, which the assessee admitted and included in the return of income. The Tribunal restored the issue to the AO for verification.

6. Addition of Unverifiable Transactions in Land Deals:
The AO added Rs. 63,29,500/- as unexplained expenditure. The CIT(A) verified and reduced the addition to Rs. 6,03,000/-. The Tribunal deleted the addition, noting that the assessee acted as a broker and the transactions were on behalf of clients.

7. Addition of Unexplained Expenditure under Section 69C:
The AO added Rs. 7,57,07,000/- based on seized documents. The CIT(A) deleted Rs. 5,93,85,000/- and upheld Rs. 1,63,22,000/-. The Tribunal deleted the addition, citing previous Tribunal findings that the assessee was a dealmaker, not the principal in transactions.

8. Addition Based on Loose Papers Indicating Unaccounted/Undisclosed Income:
The AO added Rs. 1,24,18,570/- based on a loose paper. The CIT(A) reduced the addition to Rs. 20,34,625/-. The Tribunal restored the issue to the AO for verification of additional evidence provided by the assessee.

9. Addition of Unexplained Money Found During Search:
The AO added Rs. 16,93,750/- as unexplained money. The CIT(A) upheld the addition. The Tribunal restored the issue to the AO, allowing the legal heir to provide evidence of the source of cash.

10. Addition of Unexplained Investment in Jewelry:
The AO added Rs. 33,63,147/- for unexplained jewelry. The CIT(A) reduced it to Rs. 16,81,573/-. The Tribunal restored the issue to the AO to allow benefit per CBDT instructions and verify the claim of disclosure made by the assessee.

11. Disallowance of Donation under Section 80G:
The Tribunal did not specifically address this issue in the detailed analysis provided.

Conclusion:
The Tribunal allowed the appeals partly for statistical purposes, restoring several issues to the AO for fresh examination and verification, while deleting some additions based on the explanations and evidence provided by the assessee.