2023 (9) TMI 1512 - AT - Income Tax

Cash found at the time of search - AR has submitted that as per copy of Panchnama, cash of Rs.2 Lacs only was seized and the seizure of Rs .6.90 Lacs as noted by Ld. AO is factually incorrect - AR also submitted that the same was sourced out of assessee s business income and the same was duly offered to tax - HELD THAT - Considering the same, Ld. AO is directed to verify the factual aspect. The assessee is directed to substantiate the source of cash seized. The corresponding grounds stand allowed for statistical purpose. Jewellery found at the time of search - We are of the opinion that concession as per CBDT Circular No. 1916 dated 11-05-1994 should have been granted to the assessee in full and not on an estimated basis of 200 grams per member. The Ld. AO is directed to grant the concession in full in terms of stated CBDT circular. The corresponding grounds stand allowed for statistical purpose. Professional Income - The assessee has already been granted adequate relief in the impugned order. Rental Income - We are of the opinion that estimation of higher rental income is without any basis. It is not the case of Ld. AO that the rental income was less than municipal rateable value. CIT(A) has already deleted this addition. Capital Gain - AR has drawn attention to the copy of purchase deed and encumbrance certificate towards the cost of acquisition. AR also submitted that the property was in joint ownership of assessee and his wife and therefore, entire addition could not be made in the hands of the assessee. Considering the same, this issue stand restored back to the file of Ld. AO for de novo adjudication - grounds stand allowed for statistical purpose. Purchase of Property at Muthukad, ECR - AR submitted that the property was purchased for Rs.39.48 Lacs out of which an amount of Rs.20 Lacs was funded through bank loan and the remaining amount was funded out of sale of agricultural land during AY 2007-08 - Considering the same, this issue stand restored back to the file of Ld. AO for de novo adjudication with a direction to the assessee to file the requisite details and substantiate its claim. The corresponding grounds stand allowed for statistical purpose. Agricultural income - AR averred that this addition was not made in the first round and therefore, Ld. AO has exceeded the jurisdiction in travelling beyond the issues which were part of the grounds in the original appeal before the Tribunal - As this legal argument as urged by Ld. AR is not to be accepted since the assessment, in the first round, was framed on best judgment basis and the assessee was in further appeal before Tribunal primarily on the ground of violation of natural justice. Accordingly, the assessment was set aside and Ld. AO was directed to frame de novo assessment. Therefore, this addition, in such a case, could very well be made by Ld. AO in the set aside proceedings. The legal grounds as urged by the Ld. AR stand dismissed. On merits, considering the fact that the assessee was holding agricultural land and considering the quantum of income, we are of the opinion that this income could not be considered as income from undisclosed sources. Therefore, we direct Ld. AO to accept the same as agricultural income of the assessee. The corresponding grounds stand allowed to that extent. Undisclosed Bank Accounts - AR has submitted that peak balances have wrongly been worked out by Ld. AO and that peak credit pertains to carry forward balances of AY 2007-08 and their source is attributable to consideration from sale of agricultural land during AY 2007-08 - In our order for AY 2007-08, similar issue has been restored back by us to the file of Ld. AO for de novo adjudication with a direction to the assessee to substantiate its case by establishing the source of credit entries in the bank account. The same would have bearing on the issue in this year. Therefore, this issue stand restored back to Ld. AO on similar lines. The argument that the provisions of Sec.68 would not apply to bank credit entries stand rejected since the bank accounts form books of accounts and the assessee is under an obligation to explain each credit entry in the bank accounts. The corresponding grounds stand partly allowed for statistical purpose.

Summary

Issues:
Assessment for AY 2006-07, additions made by Ld. AO, appeal against impugned order passed by Ld. CIT(A), delay condonation, arguments by Ld. AR and Ld. CIT-DR, proceedings before Ld. AO and Ld. CIT(A), findings and adjudication by ITAT Chennai.

Detailed Analysis:
1. Delay Condonation and Admittance of Appeal:
The Registry noted a 35-day delay in filing the appeal, attributed to the appellant's adverse medical conditions. Despite opposition from Ld. CIT-DR, the ITAT Chennai condoned the delay and admitted the appeal for adjudication on merits.

2. Additions by Ld. AO:
Ld. AO made various additions, including treating cash and jewellery found during search as unexplained income, estimating professional income, rental income, capital gains, purchase of property at Muthukad, agricultural income, undisclosed bank accounts, and unexplained expenditure. The total income was determined at Rs. 250.47 Lacs, leading to the appeal before Ld. CIT(A).

3. Proceedings before Ld. CIT(A):
The appellant contested the additions made by Ld. AO, providing explanations and justifications for each disputed item. However, Ld. CIT(A) confirmed most of the additions, granting partial relief on certain grounds, which led to the further appeal before ITAT Chennai.

4. Findings and Adjudication by ITAT Chennai:
The ITAT Chennai reviewed each contested issue, directing Ld. AO to reexamine certain aspects. The ITAT Chennai allowed some grounds for statistical purposes, such as cash seizure discrepancies, full concession on jewellery as per CBDT circular, reevaluation of rental income estimation, and further substantiation required for capital gains and property purchase. The ITAT Chennai also directed acceptance of agricultural income and reevaluation of undisclosed bank accounts, partially allowing the appeal.

In conclusion, the appeal was partly allowed by ITAT Chennai based on the detailed analysis and directions provided for reevaluation of specific additions made by Ld. AO.