2014 (7) TMI 1030 - AT - Income Tax

Undisclosed payment to land owners Proper appreciation of facts and evidences not made - Held that - The main contention of the assessee was that SNOA wanted to develop a housing scheme for which land was purchased from several land owners - About 28,500 sq. yard of land was transacted and alleged that SNOA had entered into a contract for purchase of land from different land owners - the question is that whether the transactions as appeared in the seized diary were in fact the transaction of SNOA or those transactions belonged to the assessee - it was expected from the AO to examine the books of accounts of SNOA, to see whether there was sufficient cash in the books of accounts before making an expenditure in cash or through cheque thus, the matter is remitted back to the AO - The queries cannot be treated as an exhaustive list and the AO, therefore, in his discretion can raise allied question to verify the claim of the assessee that the payment was not made by the assessee but by SNOA. Once the issue was restored back to the file of the First Appellate Authority, but at that time there was an apparent denial of opportunity to the assessee as prescribed under Rule 46-A by learned CIT(A) - even after the perusal of the Remand Report the questions/doubts as raised could not be removed thus, it is not only necessary but also justifiable to restore the matter back to the stage of investigation, i.e., the assessment stage so that the assessee as well as the Revenue both can go upto the hilt of the facts and thereupon can arrive at the correct conclusion Decided in favour of assessee. Addition made cash deposit in bank account source of income not appreciated Held that - The assessee has not explained the exact details of the agriculture holding and the income earned there from - It was necessary on the part of the assessee to place on record the area/measurement of the agriculture holding duly supported by the evidence - Assessee was also required to show agriculture crop produced. Be that as it was - the assessee had produced bills during the course of assessment proceedings - the assessee had produced evidence to this extent confirming the agriculture income, therefore, the AO is directed to reduce the addition and rest of the amount is confirmed Decided partly in favour of Assessee. Investment for the purpose of visa Held that - A deposit made for the purpose of obtaining Visa cannot be termed as an investment - A Visa may or may not be granted, therefore, the amount in question appears to be an expenditure and not an investment - undisclosed income has already been taxed coming out of the seized material, therefore, the expenditure for obtaining Visa can be set-off against that income the addition is set aside Decided in favour of Assessee.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 1,01,04,887/- as undisclosed payments to landowners.
2. Non-adjudication of certain grounds by CIT(A) regarding cash deposits and investments.

Detailed Analysis:

Issue 1: Confirmation of Addition of Rs. 1,01,04,887/- as Undisclosed Payments to Landowners

The assessee appealed against the confirmation of an addition of Rs. 1,01,04,887/- based on a small diary seized during a search operation. The diary allegedly contained details of cash payments to landowners for the "Shreeji Bungalows Scheme." The AO noted that the assessee, a builder and developer, made these payments, and the diary meticulously recorded these transactions. The assessee claimed that these payments were made by Shreeji Narol Owners Association (SNOA) and that he was merely a mediator.

The AO, however, was not convinced due to the lack of credible evidence from the assessee to counter the allegations. The AO applied Section 132(4A) of the IT Act, which presumes that documents found in possession during a search are owned by the person unless proven otherwise. The AO concluded that the amount was an undisclosed payment by the assessee and taxed it accordingly.

The CIT(A) initially rejected the admission of additional evidence and confirmed the AO's findings. Upon remand by the Tribunal, the CIT(A) reiterated that the assessee failed to provide satisfactory evidence to support his claim of being a mediator and confirmed the addition again.

The Tribunal, upon reviewing the case, noted several discrepancies and unanswered questions, such as the exact nature of the bank accounts, the authenticity of the Banakhats (agreements of sale), and the matching of diary entries with SNOA's books. The Tribunal deemed it necessary to restore the issue to the AO for further investigation to verify the claims made by the assessee and to ensure justice.

Issue 2: Non-Adjudication of Certain Grounds by CIT(A) Regarding Cash Deposits and Investments

Ground 5(a): Addition of Rs. 17,05,000/- as Cash Deposits in Bank Account

The AO noted several cash deposits totaling Rs. 17,05,000/- in the assessee's bank account, which the assessee claimed were from agricultural income. The AO rejected this explanation due to insufficient evidence. The CIT(A) did not adjudicate this ground, stating that there was no direction from the Tribunal regarding this addition.

The Tribunal, upon review, found that the assessee had produced bills worth Rs. 3,92,060/- during the assessment proceedings, confirming part of the agricultural income. Therefore, the Tribunal directed to reduce the addition by this amount and confirmed the rest.

Ground 5(b): Agricultural Income and Cash Deposits in Regular vs. Block Assessment

The Tribunal did not find any specific argument or evidence provided by the assessee to support this ground and thus did not address it separately.

Ground 5(c): Addition of Rs. 76,000/- as Investment in Shivshakti Consultancy Pvt. Ltd.

The AO treated Rs. 76,000/- as an undisclosed investment for obtaining a Visa. The Tribunal held that this amount should be considered an expenditure rather than an investment and directed to delete the addition, as the undisclosed income had already been taxed.

Ground 5(d): Addition of Rs. 12,660/- as Returned Income for AY 2001-02

The AO included Rs. 12,660/- as undisclosed income in the block period. The Tribunal upheld this addition, stating that such income is required to be taxed under the special provisions of the IT Act.

Conclusion:

The Tribunal partly allowed the appeal, directing further investigation on the main issue of Rs. 1,01,04,887/- and providing partial relief on the other grounds. The case was restored to the AO for a thorough examination of the claims and evidence presented by the assessee.