2014 (10) TMI 209 - AT - Income Tax

Unexplained investment in land - Search u/s 132 Held that - The lands were in the name of Shri S. Vijaya Kumar stated to be an employee of the assessee, but, it is also a fact that the investment in land was not only recorded in the books of assessee but also reflected in the balance sheet furnished along with the return of income filed in response to notice u/s 153A of the Act - AO without properly examining the books of account and the balance sheet has added the amount by simply observing that the amount has not been reflected in the return of income, which is not correct - CIT(A) sustained the addition by simply observing that the assessee has updated the books of account by incorporating such investment after search - the conclusion drawn by the AO as well as the CIT(A) are without any basis - as the assessee has reflected the investment in its books of account as well as in the balance sheet furnished along with the return of income, there is no reason to consider the investment made as unexplained the AO is directed to delete the addition of ₹ 2,10,800 Decided in favour of assessee. Addition treated as gifts Held that - The gifs consist of small amounts received from close relatives of the assessee - all the donors have furnished affidavits not only confirming the gifts but have also furnished their source of income from agriculture with supporting evidences like Pahani and certificate from the VRO - It cannot also be denied that assessee has shown gifts in the original return filed by him prior to the date of search - the addition made by observing that the creditworthiness of the donors have not been established appears to be merely on presumption and surmises - As the assessee has established the identity of the donors and their source of income as well as genuineness of transaction, which in any case has not been disputed by the CIT(A), addition of the gifts amounting to ₹ 1,99,227/- is not justified Decided in favour of assessee. Addition towards unaccounted investment Held that - While the AO has added the amount in question with the remark that the assessee has not reflected them in the returns filed, the CIT(A) sustained part of the addition on the ground that though the assessee has reflected the investments in the books of account but the lands have been purchased by third parties the observation of the AO is without any basis as Assessee has not only reflected the investments in its books of account but has also shown it in the balance sheet accompanying the return of income - The finding of the CIT(A) is also on the basis of presumptions and surmises considering the fact that merely because the investments have been made in the name of some other persons, the additions have been made by totally ignoring the fact that the assessee recorded the investments in its books of account as well as balance sheet furnished along with the return - the investments cannot be considered as unexplained Decided in favour of assessee. Addition of ₹ 10 lakhs Genuineness of transaction not proved - Held that - The expenditure claimed by the assessee on various dates towards Gajalakshmi Nagar II project, on account of gravel purchase, JCB hire charges, labour charges, land development charges, watering charges etc. - the entire expenditure has been incurred in cash and supported by only self-made vouchers - the expenditure has been recorded in the books of account, that cannot by itself prove the fact that the entire expenditure is genuine - it is incurred in cash and being supported by only self-made vouchers, some amount of inflation in the expenditure cannot be ruled out - search assessment u/s 153A of the Act cannot be confined to seized material alone - AO while making search assessment in a case where assessment has not been made in regular course can consider all aspects of income accruing to the assessee during the relevant AY - the assessee is required to prove the genuineness of the expenditure - as the assessee has not proved the genuineness of the entire expenditure claimed to have been incurred, the order passed by the CIT(A) in restricting the disallowance to 10% of the total expenditure debited to P&L A/c is reasonable Decided against assessee. Addition of unexplained investment Held that - The document has not been signed by the assessee. Similarly, assessee has submitted the affidavits of original land owners as well as vendees before the AO as well as the CIT(A) - Original land owners in their affidavits have clearly stated that they have neither sold the property to the assessee nor received any consideration from the assessee in that regard - These evidences have not been controverted by bringing any other evidence on record either by the AO or by the CIT(A) - seized document raises a presumption with regard to the authenticity of the contents thereof in terms of section 132(4A) of the Act - assessee can prove the contents of such document incorrect by producing necessary evidence - apart from unregistered sale agreement (not signed by the assessee) there are no other evidence corroborating the fact that the assessee has in fact purchased the land or has paid any consideration to the original land owners - the statement of the vendors before the departmental authorities, affidavits filed by the vendors and vendees, copies of the registered sale deeds on actual sale of the property clearly establish that the unregistered agreement of sale found during search was never acted upon, nor assessee paid any consideration to the vendors - no addition can be made at the hands of the assessee purely relying upon unregistered sale agreement when the fact remains that land was ultimately sold to some other persons by the original land owners - addition made at the hands of the assessee cannot be sustained Decided in favour of assessee. Unexplained investment in land Held that - The entire addition has been made solely relying upon the document found at the time of search indicating the sale of property to the assessee and his wife Smt. K.A. Aruna Kumari - the document does not bear any signature of the assessee and his wife - the vendors of the property in course of post search proceeding when confronted with the seized material categorically stated before the ADIT that they have not sold the property to the assessee nor received any consideration from the assessee - solely relying upon unregistered document, which is also not signed by the assessee and his wife, addition cannot be made at the assessee s hands - the AO has not brought any corroborative material on record to prove that the transaction as mentioned in unregistered agreement of sale has fructified and the consideration referred to therein was actually paid by the assessee - since there are material to indicate that the consideration mentioned in the unregistered and unsigned document was actually paid by the assessee to land owners and when the materials on record otherwise prove that the land was sold to persons other than the assessee and his wife, no addition can be made at the hands of the assessee by solely relying upon the unregistered sale agreement Decided in favour of assessee. Partial addition made Held that - The assessee has explained that the amount was received on behalf of Shri K. Harinath Reddy as GPA Holder towards sale of site on 23/08/2007 and the same were passed on to the Shri Harinath Reddy on 08/04/2007 - there is a credit entry of ₹ 36 lakhs with the noting that the amount was received on behalf of Shri Harinath Reddy being a GPA holder - assessee has referred to the returns of income of Shri K.Gopinath Reddy and K. Vishwanatha Reddy to substantiate that sale of land has been shown by the concerned persons by declaring capital gain - amount of ₹ 36 lakhs has been paid back to Shri K. Harinath Reddy - only because assessee has shown liability of ₹ 36 lakhs it cannot be inferred that the amount is the unexplained cash credit - This could have been established had Shri Harinath Reddy been examined - No enquiry has been taken up with shri Harinath Reddy to ascertain whether the assessee had repaid the amount of ₹ 36 lakhs as claimed by the assessee the matter is to be remitted back to the AO for fresh consideration Decided in favour of assessee. Amount of fictitious gifts deleted Held that - The AO has given absolutely no reason why he considers gifts to be unexplained inspite of the fact that the assessee has furnished confirmations/affidavits along with other details like land holding of the donors their source of income etc. - gifts are of small amounts of ₹ 30,000/- to ₹ 45,000/- from different donors and most of them are close relatives of the assessee - when the assessee has established the identity of the donors, their source of income and the donors have also confirmed of having gifted the amounts to the assessee, it is unreasonable on the part of the AO to ignore the evidences brought on record and make addition by treating the gifts as unexplained - the CIT(A) was justified in deleting the addition made by the AO Decided against revenue. Unexplained investment in land Held that - CIT(A) rightly observed that the AO without properly verifying the facts has made the addition in a summary manner - the assessee has reflected the investment made in purchase of land in his books of account along with registration charges, the conclusion drawn by the AO that the assessee has not disclosed the investment in the return of income is without any basis - this fact has not been controverted by the department by bringing any other material on record the order of the CIT(A) is upheld Decided against revenue. Addition in construction of building Held that - As decided in assessee s own case for the earlier year, it has been held that the seized material clearly indicates that the expenditure incurred was towards construction of assessee s own house as well as the house of Shri V. Mallesh - even as per the seized material, it cannot be said that the assessee has invested more than ₹ 27,40,957/- as disclosed in the return of income for the AY 2003-04 and 2004-05 - the valuation made by the DVO also gives credence to the fact that the cost of construction disclosed by the assessee at ₹ 27,40,957/- is correct considering the fact that the DVO has arrived at the cost of construction at ₹ 30.04 lakhs - CIT(A) was justified in deleting the addition of ₹ 5,01,069/- as well as the amount of ₹ 2,63,043/- being the difference between the valuation as per the assessee and cost of construction determined by the DVO as the difference is negligible, which can be due to the fact of self supervision and procurement of materials by the assessee at lower cost Decided against revenue. Addition of unexplained investment Held that - CIT(A) rightly noted that the document in question on the basis of which AO has made the addition is an unregistered document and not signed by the assessee - original land owners in the post search proceedings have categorically denied of having sold the property to the assessee or receiving any consideration towards proposed sale of the property - property in question has ultimately found to have been sold to various other persons and not the assessee and Smt. K. Aruna Kumari - solely relying upon the seized document marked as Annexure A/KCRN/05 addition could not have been made by the AO when the evidences brought on record clearly indicate that the sale was neither effected to the assessee nor payment has been made by the assessee - In absence of any other material brought on record to establish the fact that unregistered sale agreement was acted upon or the money actually changed hand it is not possible to sustain the addition the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Addition of Rs. 2,10,800/- as unexplained investment.
2. Addition of Rs. 1,99,227/- as unexplained gifts.
3. Addition of Rs. 7,76,500/- as unaccounted investment.
4. Addition of Rs. 6,47,201/- as disallowed expenditure.
5. Addition of Rs. 1,30,000/- out of Rs. 13 lakhs disallowed by the AO.
6. Addition of Rs. 26,19,750/- as unexplained investment.
7. Addition of Rs. 1,19,37,000/- as unexplained investment in land.
8. Addition of Rs. 7,70,000/- as unexplained investment in land.
9. Addition of Rs. 9,64,675/- as disallowed expenditure.
10. Addition of Rs. 36,00,000/- out of Rs. 51,23,987/- as unexplained credits.
11. Addition of Rs. 13,77,586/- as unexplained cash credits.
12. Addition of Rs. 15,02,657/- as unexplained investment.
13. Addition of Rs. 5,04,800/- as unexplained investment in land.
14. Addition of Rs. 7,64,112/- as unexplained investment in construction.
15. Addition of Rs. 16,32,958/- and Rs. 26,30,000/- as unexplained credits.
16. Addition of Rs. 13,67,631/- as unexplained cash credits.
17. Addition of Rs. 1,25,00,000/- as unexplained investment.
18. Addition of Rs. 4,82,32,313/- as unexplained investment.
19. Addition of Rs. 3,90,42,592/- as unexplained investment.
20. Addition of Rs. 18,00,000/- as unaccounted investment.
21. Addition of Rs. 36,00,000/- as unrecorded investment in land.
22. Addition of Rs. 75,74,097/- as unexplained credits.
23. Addition of Rs. 12,68,164/- as unexplained credits.
24. Addition of Rs. 65,50,000/- as unexplained credits.
25. Addition of Rs. 12,92,266/- as unexplained credits.
26. Addition of Rs. 40,00,000/- as unaccounted investment.
27. Addition of Rs. 42,37,000/- as unaccounted investment.
28. Addition of Rs. 2,20,000/- as unaccounted expenditure.
29. Addition of Rs. 57,19,495/- as unaccounted expenditure.

Detailed Analysis:

1. Addition of Rs. 2,10,800/- as unexplained investment:
The Tribunal found that the investment in land was recorded in the books of the assessee and reflected in the balance sheet furnished with the return of income. The AO's and CIT(A)'s conclusions were without basis. The Tribunal directed the AO to delete the addition.

2. Addition of Rs. 1,99,227/- as unexplained gifts:
The Tribunal noted that the gifts were received from close relatives who confirmed the gifts through affidavits and provided evidence of their agricultural income. The addition was found to be based on presumptions, and the Tribunal directed the AO to delete it.

3. Addition of Rs. 7,76,500/- as unaccounted investment:
The Tribunal observed that the investments were recorded in the books and reflected in the balance sheet. The CIT(A)'s decision to sustain part of the addition was based on presumptions. The Tribunal directed the AO to delete the addition.

4. Addition of Rs. 6,47,201/- as disallowed expenditure:
The Tribunal upheld the CIT(A)'s order to restrict the disallowance to 10% of the total expenditure claimed, considering the nature of the expenditure and the fact that it was supported by self-made vouchers.

5. Addition of Rs. 1,30,000/- out of Rs. 13 lakhs disallowed by the AO:
The Tribunal upheld the CIT(A)'s order to restrict the disallowance to 10% of the total expenditure claimed, following the same reasoning as in the previous issue.

6. Addition of Rs. 26,19,750/- as unexplained investment:
The Tribunal found that the unregistered sale agreement was not signed by the assessee and the property was sold to other persons. The addition was based on presumptions, and the Tribunal directed the AO to delete it.

7. Addition of Rs. 1,19,37,000/- as unexplained investment in land:
The Tribunal found that the unregistered document was not signed by the assessee, and the property was sold to other persons. The addition was based on presumptions, and the Tribunal directed the AO to delete it.

8. Addition of Rs. 7,70,000/- as unexplained investment in land:
Following the reasoning in a similar issue, the Tribunal directed the AO to delete the addition.

9. Addition of Rs. 9,64,675/- as disallowed expenditure:
The Tribunal upheld the CIT(A)'s order to restrict the disallowance to 10% of the total expenditure claimed, following the same reasoning as in previous issues.

10. Addition of Rs. 36,00,000/- out of Rs. 51,23,987/- as unexplained credits:
The Tribunal remitted the issue to the AO for fresh examination, directing the AO to make necessary inquiries and provide the assessee an opportunity to be heard.

11. Addition of Rs. 13,77,586/- as unexplained cash credits:
The Tribunal found that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions. The addition was based on presumptions, and the Tribunal upheld the CIT(A)'s order to delete it.

12. Addition of Rs. 15,02,657/- as unexplained investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the investment was explained through the books of the assessee and the balance sheet.

13. Addition of Rs. 5,04,800/- as unexplained investment in land:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the investment was reflected in the books of the assessee and the balance sheet.

14. Addition of Rs. 7,64,112/- as unexplained investment in construction:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the investment was reflected in the books of the assessee and the balance sheet.

15. Addition of Rs. 16,32,958/- and Rs. 26,30,000/- as unexplained credits:
The Tribunal upheld the CIT(A)'s order to delete the additions, finding that the advances were explained through the books of the assessee and the balance sheet.

16. Addition of Rs. 13,67,631/- as unexplained cash credits:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the loans were explained through the books of the assessee and the balance sheet.

17. Addition of Rs. 1,25,00,000/- as unexplained investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the unregistered sale agreement was not signed by the assessee and the property was sold to other persons.

18. Addition of Rs. 4,82,32,313/- as unexplained investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the seized material was a dumb document and there was no corroborative evidence to establish the entries made in it.

19. Addition of Rs. 3,90,42,592/- as unexplained investment:
Following the reasoning in a similar issue, the Tribunal upheld the CIT(A)'s order to delete the addition.

20. Addition of Rs. 18,00,000/- as unaccounted investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the advance was recorded in the books of the assessee and refunded through banking channels.

21. Addition of Rs. 36,00,000/- as unrecorded investment in land:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the document was not signed by the assessee and the vendor denied the transaction.

22. Addition of Rs. 75,74,097/- as unexplained credits:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the advances were explained through the books of the assessee and the balance sheet.

23. Addition of Rs. 12,68,164/- as unexplained credits:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the loans were explained through the books of the assessee and the balance sheet.

24. Addition of Rs. 65,50,000/- as unexplained credits:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the seized material was a dumb document and there was no corroborative evidence to establish the entries made in it.

25. Addition of Rs. 12,92,266/- as unexplained credits:
Following the reasoning in a similar issue, the Tribunal upheld the CIT(A)'s order to delete the addition.

26. Addition of Rs. 40,00,000/- as unaccounted investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the investment was explained through the books of the assessee and the balance sheet.

27. Addition of Rs. 42,37,000/- as unaccounted investment:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the investments were explained through the books of the assessee and the balance sheet.

28. Addition of Rs. 2,20,000/- as unaccounted expenditure:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the expenditure was explained through the books of the assessee and the balance sheet.

29. Addition of Rs. 57,19,495/- as unaccounted expenditure:
The Tribunal upheld the CIT(A)'s order to delete the addition, finding that the expenditure was explained through the books of the assessee and the balance sheet.

Summary of Results:
1. ITA No. 1462/Hyd/2012 - Allowed
2. ITA No. 1463/Hyd/2012 - Allowed
3. ITA No. 1464/Hyd/2012 - Partly Allowed
4. ITA No. 1465/Hyd/2012 - Partly Allowed
5. ITA No. 1466/Hyd/2012 - Partly Allowed for Statistical Purposes
6. ITA No. 1467/Hyd/2012 - Dismissed
7. ITA No. 1450/Hyd/2012 - Dismissed
8. ITA No. 1451/Hyd/2012 - Dismissed
9. ITA No. 1452/Hyd/2012 - Dismissed
10. ITA No. 1453/Hyd/2012 - Dismissed
11. ITA No. 1454/Hyd/2012 - Dismissed