2014 (4) TMI 818 - AT - Income Tax

Validity of assessment u/s 153C of the Act - Held that - The condition precedent for assuming jurisdiction u/s 153C is seizure of article or thing or books of account or any documents belonging to the assessee concerned - AO has not referred to any seized material for making the additions in dispute - there is no material available before the AO leave alone any seized material on the basis of which the AO could have made the addition - The AO has simply relied upon the information submitted by the assessee in the original return filed by him prior to the date of search for making additions in question - there is no material before the AO either as a result of search or enquiry made by him, to come to the conclusion that the amount of Rs. 3,00,000/- and Rs. 5,00,000/- are unexplained income of the assessee - when admittedly there is no seized material belonging to the assessee, the AO could not have proceeded to make assessment u/s 153C of the Act Relying upon Vijayabhai N. Chandrani Vs. ACIT 2010 (3) TMI 770 - Gujarat High Court there was no reason to interfere with the order of the CIT(A) Decided against Revenue. Addition made on account of income from other sources Held that - The addition was made solely on the reason that the assessee has failed to establish that he was earning agricultural income by furnishing proper details and evidence - the assessee has shown the land as an asset and even though the confirmation letter mentions about payment of annual lease rental, but, there is no other evidence to show that Sri K. Subhash Chandra Bose was carrying on agricultural operation on the said land - the household card of Sri K. Subhash Chandra Bose mentions his annual income at Rs. 18,000 - it raises serious doubt as to how a person having annual income of Rs. 18,000/- can pay lease rental of Rs. 75,000/- to the assessee - The assessee has not at all proved with sufficient evidence that agricultural operation was being carried on the said land or it was generating income from agriculture thus, there is no infirmity in the order of the CIT(A) in sustaining the addition as income from other sources Decided against Assessee. Addition on account of gift received from Father-in-law Held that - Sri M. Krishnama Naidu has mentioned that he is owner of 2.97 acres of land and earning agricultural income of Rs. 80,000/- to Rs. 1 lakh per year - there is no other evidence produced by the assessee to establish that his father-in-law did actually earn agricultural income to the extent mentioned in the conformation letter - the gift has been made in cash and the donor Shri Krishnamma Naidu is not an income-tax assessee - there is no evidence produced by the assessee either to prove the capacity of the donor or the fact of earning agricultural income by him, the addition on that account is justified Decided against Assessee. Disallowance of expenses incurred on development of the site Held that - CIT(A) was of the view that the expenses incurred for agricultural land development cannot be allowed since the sale of agricultural land and profit derived therefrom cannot be assessed for capital gains there is no reason to interfere with the order of CIT(A) as the assessee has not produced even a semblance of evidence to prove the expenditure incurred towards development charges Decided against Assessee. Addition of loss on account of sale of car Held that - The assessee had purchased a Santro car on 06/05/2003 for a consideration of Rs. 3,65,070/- and the said car was sold on 19/07/2007 for Rs. 2,35,000 - the assessee is estimating his income from business, the contention of the revenue that depreciation is deemed to have been allowed to the assessee requires to be looked into thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee. Admission of STCG on sale of site Held that - After perusing the details of purchase of land made by the assessee, the matter is required to tbe remitted back to the AO for fresh adjudication Decided in favour of Assessee. Deletion of unexplained cash credits Held that - CIT(A) has set aside the addition solely on the ground that they are made through banking channel - this may be correct in case of Smt. Santhoshamma in whose case Assessee furnished copies of bank account of the creditor as well as his own bank account reflecting the advancement of Rs. 5 lakhs - Smt. Santhoshamma worked as a head nurse also to a certain extent proves her capacity to make the gift - so far as the other two creditors are concerned, namely, Sri Sudhakar and Sri Ananda Kumar admittedly both are non-resident Indians residing outside India thus, in their case strict proof of evidence is required with regard to creditworthiness and genuineness of the loan - it is required to be verified from their bank accounts whether they had source to advance the amount to the assessee - the CIT(A) s finding with regard to the amount of Rs. 5 lakhs from Smt. Santoshamma is accepted but so far as loan of Rs. 4,17,670/- and Rs. 2,01,890/- from Sri Sudhakar and Sri Ananda Kumar are concerned, the matter is remitted back to the AO for verification Decided partly in favour of Revenue.

Summary

Issues Involved:
1. Jurisdiction under Section 153C of the IT Act.
2. Addition of unexplained cash credits.
3. Addition of unexplained loan amount.
4. Addition of agricultural income.
5. Addition of gift received.
6. Addition of development charges.
7. Addition of loss on sale of car.
8. Addition of cost of site.
9. Addition of unexplained cash credits from loans and gifts.

Detailed Analysis:

1. Jurisdiction under Section 153C of the IT Act:
The AO assumed jurisdiction u/s 153C and issued a notice to the assessee. The AO made additions based on information from the original return of income, not on any seized material. The CIT(A) observed that no new information was disclosed in response to the notice u/s 153C and deleted the additions. The Tribunal upheld the CIT(A)'s decision, stating that the AO cannot make additions u/s 153C without any seized material belonging to the assessee.

2. Addition of unexplained cash credits:
The AO added Rs. 3,00,000/- as unexplained cash credits. The CIT(A) deleted the addition, noting that the credits were disclosed in the original return. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO had no material to justify the addition.

3. Addition of unexplained loan amount:
The AO added Rs. 5,00,000/- as unexplained loan. The CIT(A) deleted the addition, observing that the loan was disclosed in the original return. The Tribunal upheld the CIT(A)'s decision, stating that the AO had no material to substantiate the addition.

4. Addition of agricultural income:
The AO added Rs. 75,000/- as income from other sources, disbelieving the agricultural income claim. The CIT(A) confirmed the addition. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence to support the agricultural income claim.

5. Addition of gift received:
The AO added Rs. 4,00,000/- as unexplained cash, doubting the gift from the assessee's father-in-law. The CIT(A) confirmed the addition. The Tribunal upheld the CIT(A)'s decision, citing insufficient evidence to prove the donor's capacity and the genuineness of the gift.

6. Addition of development charges:
The AO disallowed Rs. 60,000/- claimed as development charges due to lack of evidence. The CIT(A) confirmed the disallowance. The Tribunal upheld the CIT(A)'s decision, noting the absence of supporting evidence for the claimed expenditure.

7. Addition of loss on sale of car:
The AO disallowed Rs. 1,27,000/- claimed as a loss on the sale of a car due to lack of evidence. The CIT(A) confirmed the addition. The Tribunal remitted the issue back to the AO for fresh consideration, emphasizing the need to verify the claim and the deemed depreciation.

8. Addition of cost of site:
The AO disallowed Rs. 3,78,493/- claimed as the cost of the site due to lack of evidence. The CIT(A) confirmed the addition. The Tribunal remitted the issue back to the AO for fresh consideration, instructing the AO to verify the claim with supporting evidence.

9. Addition of unexplained cash credits from loans and gifts:
The AO added Rs. 11,19,560/- as unexplained cash credits from loans and gifts. The CIT(A) deleted the addition, noting that the loans were received through banking channels. The Tribunal partly upheld the CIT(A)'s decision regarding the gift from Smt. Santhoshamma but remitted the issue of loans from NRIs back to the AO for verification of creditworthiness and genuineness.

Conclusion:
The Tribunal dismissed the revenue's appeals for AY 2002-03 and 2005-06, and the assessee's appeal for AY 2006-07. It allowed the assessee's appeal for AY 2008-09 for statistical purposes and partly allowed the revenue's appeal for AY 2007-08 for statistical purposes. The cross-objections filed by the assessee were dismissed as infructuous.