2014 (8) TMI 201 - AT - Income Tax

Unaccounted cash receipts Held that - It is very much essential to know how the payments have been treated at the hands of the company - Neither the assessment order nor any other material brought on record could even remotely establish that payments to the extent indicated in the loose sheet were actually made to the assessee - neither the AO nor the CIT(A) have conducted any enquiry to ascertain the real fact - Solely relying upon the single piece of paper addition cannot be made at the hands of the assessee considering the fact that there is serious doubt with regard to authenticity of notings made - As it appears, the AO has made the addition merely on presumption without making any enquiry to establish the fact that payments as per the impounded document was actually received by assessee - the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh consideration Decided in favour of Assessee. Addition of accrued interest Held that - It contains notings of certain amounts on specific dates against the name of some persons - one of the noting is for an amount in the name of Raji - assessee cannot blow hot and cold at the same time - When the assessee accepts a part of the seized material by offering the amounts mentioned as his unexplained income, he cannot reject the interest on advance forming part of the same seized material - when the assessee accepts the advances mentioned in the seized material as his income, the interest calculated on the amount advanced as noted in the very same seized material certainly have to be considered to have been earned/received by the assessee thus, there was no infirmity in the order of the CIT(A) Decided against the assessee.

Summary

Issues Involved:
1. Addition of Rs. 1,80,56,000 as unaccounted cash receipts for AY 2007-08.
2. Additions made towards accrued interest for various assessment years.

Detailed Analysis:

1. Addition of Rs. 1,80,56,000 as Unaccounted Cash Receipts for AY 2007-08:

The first issue pertains to the addition of Rs. 1,80,56,000 sustained by the CIT(A) as unaccounted cash receipts for AY 2007-08. The assessee, a doctor and CEO of M/s Krishna Institute of Medical Sciences Ltd., originally declared income of Rs. 34,75,240 besides agricultural income of Rs. 2,00,000. Following a search and seizure operation, a loose sheet indicating payment of Rs. 1,80,56,000 to the assessee by M/s Bollineni Ramanaiah Memorial Hospital Pvt. Ltd. was found. The assessee contended that the loose sheet was prepared by a junior trainee accounts staff and had no bearing on the actual accounts. The Assessing Officer (AO) rejected this explanation, adding Rs. 1,87,56,000 to the income, considering it as deemed dividend under Section 2(22)(e) of the Act. The CIT(A) sustained the addition of Rs. 1,80,56,000 after giving credit for repayment of Rs. 7 lakhs by the assessee, stating that the income of every individual in a particular financial year has to be taxed in the relevant assessment year and there is no concept of group assessment under Section 153A. The Tribunal found that the document's authenticity was doubtful and that there was no corroborative evidence to show the payments were actually received by the assessee. The case was remitted back to the AO for fresh consideration with the direction that no addition should be made unless corroborative evidence is found.

2. Additions Made Towards Accrued Interest:

The second issue involves additions made towards accrued interest based on certain loose sheets found during the search operation. The assessee had offered Rs. 32 lakhs as additional income for AY 2007-08 based on these documents. However, the AO also noticed calculations of interest amounting to Rs. 13.86 lakhs on an advance of Rs. 21 lakhs to an individual named "Raji." The AO quantified accrued interest for the assessment years under dispute, which was sustained by the CIT(A). The CIT(A) held that the seized material has to be considered in totality, and the assessee cannot accept one part while rejecting the other. The Tribunal agreed, stating that when the assessee accepts the advances mentioned in the seized material as his income, the interest calculated on the amount advanced as noted in the same seized material must also be considered as earned/received by the assessee. Therefore, the Tribunal found no infirmity in the order of the CIT(A) and dismissed the ground raised by the assessee.

Conclusion:

In conclusion, the Tribunal remitted the issue of unaccounted cash receipts back to the AO for fresh consideration, while it upheld the additions made towards accrued interest. ITA No. 1731/Hyd/13 was partly allowed for statistical purposes, and ITA Nos. 1732, 1733 & 1734/Hyd/13 were dismissed.