2023 (11) TMI 1095 - AT - Income Tax

Unexplained investment for purchase of land - Assessee contended that the investment has been made by him out of the disclosure made by the partnership firm which has already suffered to tax - HELD THAT - Thus being a close nexus between the assessee and the firm, the contention raised by the assessee cannot be rejected without any strong reason. As such, the onus shifted upon the revenue to prove that the contention of the assessee is wrong, and the income disclosed by the partnership firm has been used for some other purpose but what we find that no such detail is forthcoming from the other of the authority below. In addition to the above, we also note that the assessee along with other partners has made disclosure of the income of the firm in pursuance to the search u/s 132. Had there been no nexus between the assessee and Om Corporation, there was no occasion for the assessee to make the disclosure along with the other partner under his signature on behalf of the firm. Thus, in such fact and circumstances the contention of the assessee cannot be rejected. It is equally important to note that there was no information available on record about the utilization of the money disclosed by the partnership as income except the investment made by the assessee which is also evident from the financial statement of Om Corporation in the year ending 31/03/2011. As such, we have perused the financial statement of OM Corporation for the year ending as on 31/03/2011, we note that the M/s Om Corporation has shown an advance for the sum which makes abundantly clear that the disclosure made by the firm has been utilized in the investment of land as discussed above. Accordingly, we do not find any infirmity in the finding of the CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed. Addition on account of cash found during the search operation - AO during the assessment proceedings found that there was cash found as on the date of search, the source of which was explained by the assessee out of the agriculture - assessee has also submitted the agriculture bills in support of his claim - AO found that the agriculture bills were not pertaining to the period in dispute and therefore he treated the same as undisclosed income of the assessee - HELD THAT - Admittedly, it is the onus upon the assessee to justify his stand based on the documentary evidence that he has earned agriculture income in the year under consideration. Indeed, the assessee failed to discharge the onus cast upon him based on the documents. However, because the assessee in the earlier AY has disclosed the agricultural income, the possibility of having agriculture income in the year under consideration cannot be ruled out. Therefore, in the interest of justice and fair play and to put an end to the ongoing dispute, we are of the view that justice will be served to the assessee and the revenue if 50% of the allege agriculture income is treated as income from the agriculture activity. Accordingly, we direct the AO to restrict the addition being 50% of agriculture as income from undisclosed sources. Hence, the ground of appeal of the assessee is hereby partly allowed.

Summary

Issues Involved:
1. Deletion of addition made on account of unexplained investment for purchase of land.
2. Addition on account of cash found during the search operation.

Summary:

Issue 1: Deletion of Addition Made on Account of Unexplained Investment for Purchase of Land

The Revenue appealed against the deletion of an addition of Rs. 1,60,37,000/- made by the AO on account of unexplained investment in land. The assessee, part of the Savalia Group, was involved in a search operation under section 132 of the Act, where he disclosed Rs. 13,63,000/- as undisclosed income and claimed the investment in land was made from the income disclosed by M/s Om Corporation. The AO contended that since the assessee was not a partner in Om Corporation, he could not benefit from the firm's disclosure. The Ld. CIT(A) deleted the addition, noting that the day-to-day affairs of Om Corporation were managed by the assessee, and the cash book of the firm was found in his possession. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the close nexus between the assessee and the firm and the lack of evidence from the Revenue to prove otherwise. Therefore, the appeal of the Revenue was dismissed.

Issue 2: Addition on Account of Cash Found During the Search Operation

The assessee appealed against the addition of Rs. 5,20,351/- confirmed by the Ld. CIT(A) as undisclosed income. The AO found cash during the search, which the assessee claimed was from agricultural income, supported by bills. However, the AO and Ld. CIT(A) rejected this claim as the bills were not from the relevant period. The Tribunal noted that the assessee had disclosed agricultural income in previous years and concluded that 50% of the alleged agricultural income should be treated as income from undisclosed sources. Thus, the addition was restricted to Rs. 2,60,000/-, and the appeal of the assessee was partly allowed.

Conclusion:

- The appeal of the Revenue bearing ITA No. 2917/Ahd/2013 for AY 2011-12 was dismissed.
- The appeal of the Assessee bearing ITA No. 2646/Ahd/2013 for AY 2011-12 was partly allowed.

Order pronounced in the Court on 30/08/2023 at Ahmedabad.