2012 (11) TMI 750 - AT - Income Tax

Undisclosed income alleged that assessee incurred estimated expenditure of Rs.25,19,86,000/- in acquiring development rights of Shela Land whereas a sum of Rs.4,55,00,000/- only was recorded in the books of account and, therefore, the difference represented the assessee s unexplained or unaccounted investment Held that - Amounts have been received through account payee cheques through normal banking transactions and all the transactions are recorded in the books of accounts - amounts received against the booking of the plots are in the nature of business turnover accounted in the books of accounts - Since the assessee recorded the receipts in the books of accounts for booking of the plots which would ultimately be turnover/sales of the assessee which is not disputed by the AO, on which profit is shown, no addition could be made on account of unexplained credit u/s 68 of the IT Act - Merely because the Tribunal in the block assessment order observed that the same addition could be taken up in regular assessment as noted by the AO would not be a reason for the AO to make the addition without any just cause In favor of assessee Addition on account of unexplained cash deposits in the bank accounts Held that - cash deposits on various dates in the bank account of the assessee company are duly recorded in the regular books of accounts even prior to the search. The books of accounts of the assessee have not been disputed by the AO. All the cash deposits were found to have been made out of the cash balances available in the books of accounts on the date of the deposit in the bank. Since the book entries are not in dispute, therefore, there is no need to file separate cash flow statement as is argued by the learned DR because the book entries explaining the availability of the cash with the assessee company on the date of bank deposits would be more significant and relevant as against cash flow statement - AO has not brought any adverse material against the assessee on record to prove that the assessee utilized or spent the amount of withdrawal in any specific item In favor of assessee Addition on account of unaccounted income of Radhe Acre I & II Schemes Held that - Complete details of the sales of the plot from 15.3.1996 to 31.3.1996 have been filed - Assessing Officer has merely assumed that during the post search period also the assessee company indulged in charging on-money. No evidence or material has been brought on record by the Assessing Officer to support such assumption - AO merely on the basis of block assessment order assumed that in the post search period also assessee has received on money. No evidence or material was brought on record by the AO to support his assumption. Merely on the basis of assumption no such addition could be made against the assessee - In favor of assessee Interest expenditure held that - the assessee company had huge interest free funds of its own which were sufficient to cover any alleged interest free advances made by the assessee. No nexus has been proved between the interest bearing borrowed funds and interest free advances. The explanation of the assessee clearly proved that funds have been used for the purpose of business. Decided in favor of assesse.

Issues Involved:
1. Deletion of addition of Rs.99,35,200/- on account of unexplained cash credits under section 68 of the IT Act.
2. Deletion of addition of Rs.4,00,000/- on account of unexplained cash credit.
3. Deletion of addition of Rs.13,60,00,523/- made on account of receipts from development rights.
4. Deletion of addition of Rs.2,79,16,000/- made on account of unexplained cash deposits in bank accounts.
5. Deletion of addition of Rs.13,23,000/- made on account of unaccounted income of Radhe Acre I & II Schemes.
6. Deletion of addition of Rs.56,19,870/- on account of interest expenditure claimed by the assessee.
7. Deletion of addition of Rs.2,00,000/- on account of unexplained deposits in bank account.

Detailed Analysis:

1. Deletion of Addition of Rs.99,35,200/- on Account of Unexplained Cash Credits:
The Tribunal noted that the amount of Rs.99,35,200/- was received through account payee cheques and was duly recorded in the books of account. The CIT(A) found that the cash credits were part of the business turnover and were accounted for in the regular books. The Tribunal upheld the CIT(A)'s finding, emphasizing that the amounts were business receipts and could not be treated as unexplained cash credits under section 68 of the IT Act.

2. Deletion of Addition of Rs.4,00,000/- on Account of Unexplained Cash Credit:
The CIT(A) found that the amount of Rs.4,00,000/- was repaid by cheque upon cancellation of booking and was supported by affidavits and bank statements. The Tribunal agreed with the CIT(A) that the transaction was genuine and properly documented, thus there was no basis for the addition under section 68.

3. Deletion of Addition of Rs.13,60,00,523/- Made on Account of Receipts from Development Rights:
The CIT(A) observed that the receipts were duly accounted for in the regular books and were part of the business turnover. The Tribunal noted that the entire amount was split into receipts attributable to the cost of land and development charges, and these were to be passed on to the society or retained by the assessee for development expenditure. The Tribunal upheld the deletion of the addition, finding no basis for treating the receipts as undisclosed income.

4. Deletion of Addition of Rs.2,79,16,000/- Made on Account of Unexplained Cash Deposits in Bank Accounts:
The CIT(A) found that the cash deposits were duly recorded in the books of account and were made from sufficient cash balances available. The Tribunal agreed, noting that the AO's addition was based on assumptions without conclusive evidence. The Tribunal emphasized that the transactions were recorded in the regular books of account, and the AO failed to prove that the deposits were unaccounted income.

5. Deletion of Addition of Rs.13,23,000/- Made on Account of Unaccounted Income of Radhe Acre I & II Schemes:
The CIT(A) found that the sales during the post-search period were received by cheque and duly accounted for. The Tribunal noted that the AO's assumption of on-money receipt was without evidence and based on pre-search period findings. The Tribunal upheld the deletion, stating that no addition could be made on mere presumption.

6. Deletion of Addition of Rs.56,19,870/- on Account of Interest Expenditure Claimed by the Assessee:
The CIT(A) found that the assessee had sufficient interest-free funds to cover any interest-free advances and that the borrowed funds were used for business purposes. The Tribunal agreed, noting that the AO failed to establish a nexus between borrowed funds and interest-free advances. The Tribunal upheld the deletion, emphasizing the proper use of funds for business purposes and the net surplus interest income.

7. Deletion of Addition of Rs.2,00,000/- on Account of Unexplained Deposits in Bank Account:
The CIT(A) found that the cash deposit was duly accounted for in the books of account. The Tribunal noted that this issue was connected with the unexplained cash deposits and upheld the deletion, finding no justification for the addition.

Conclusion:
The Tribunal dismissed the departmental appeal, upholding the CIT(A)'s order in deleting all the additions made by the AO. The Tribunal emphasized the proper accounting and documentation of transactions, the lack of evidence for the AO's assumptions, and the proper use of funds for business purposes.

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