2013 (10) TMI 696 - AT - Income Tax

Unexplained cash credit u/s 68 - Held that - assessee filed inundated evidence in support of the genuineness of the transaction. The AO chose to ignore the same without showing how it was wrong and was needlessly swayed by the mere fact the T.S. Motors had not separately demonstrated this sum in its balance sheet. The assessee cannot be faulted if T.S. Motors clubbed such advance of Rs.15 lac with other advances instead of showing it separately. It was incumbent upon the AO to conduct inquiry and verify the correctness of the documents with M.S. Motors, if he was not ready to accept them as correct. Nothing adverse has been brought on record in this regard. In the given circumstances, we are unable to find any flaw in the impugned order in deleting this addition on the basis of the overwhelming evidence filed by the assessee in support of the genuineness of the transaction - Decided against the revenue. Unexplained investment - Held that - it is patent that the difference in the cost of construction between the assessee and DVO for the current year stands only at Rs.2.05 lac. Such difference constitutes and minuscule 3%. As against the assessee s declared investment at Rs.1.22 crore over the period, the DVO has estimated cost of construction at Rs.1.25 crore. It is crystal clear that the year-wise figures as declared by the assessee and as estimated by the DVO are almost in the same vicinity. The difference between two values is minimal. After all, estimate is an estimate and cannot take the place of actual. Such a meager difference does not require any addition. The exercise embarked upon by the AO in treating 80% of the total investment over the years as having been made in the year under consideration is whimsical and capricious devoid of any legally sustainable reasons - Decided against Revenue.

Summary

Issues:
1. Deletion of addition of Rs.15 lac treated as unexplained cash credit under section 68 of the Act.
2. Deletion of addition of Rs.81,60,000 treated as unexplained investment.

Issue 1: Deletion of addition of Rs.15 lac treated as unexplained cash credit under section 68 of the Act:

The Revenue appealed against the deletion of the addition of Rs.15 lac, treated as unexplained cash credit under section 68 of the Act, by the ld. CIT (A). The assessee received an advance of Rs.15 lac from T.S. Motors, supported by an agreement and relevant documents. The AO raised doubts due to the cash nature of the transaction and the lack of separate reflection in T.S. Motors' balance sheet. However, the ld. CIT (A) accepted the genuineness of the credit based on the evidence provided by the assessee.

The Tribunal analyzed the evidence presented, including board resolutions, agreements, and ledger accounts, which were not disputed by the AO. Section 68 mandates that unexplained sums may be taxed unless satisfactorily explained. The Tribunal found the evidence overwhelmingly supported the genuineness of the transaction. The AO's reliance on the absence of separate reflection in T.S. Motors' balance sheet was deemed insufficient to disprove the credit's authenticity. The Tribunal concluded that the deletion of the addition was justified based on the substantial evidence provided by the assessee.

Issue 2: Deletion of addition of Rs.81,60,000 treated as unexplained investment:

The AO made an addition of Rs.81,60,000 as unexplained investment, representing 80% of the total investment made by the assessee over the years, based on a report and a statement from Shri Bhagat. The ld. CIT (A) deleted this addition, and the Tribunal upheld the decision after reviewing the evidence. The assessee submitted year-wise construction details and contested Shri Bhagat's statement, emphasizing the lack of opportunity for cross-examination.

During the appellate proceedings, the assessee provided a report comparing the declared investments with the DVO's estimates, showing a minimal difference of Rs.2.05 lac for the current year. The Tribunal noted that the year-wise figures were closely aligned, with a negligible 3% difference. The AO's arbitrary decision to treat 80% of total investment as made in the relevant year lacked legal basis and was deemed unwarranted. Consequently, the Tribunal upheld the deletion of the addition of Rs.81,60,000 as unexplained investment.

In conclusion, the Tribunal dismissed the appeal, affirming the deletion of both additions made by the AO. The judgments were based on the substantial evidence provided by the assessee, which sufficiently proved the genuineness of the transactions and investments in question.