2015 (2) TMI 157 - AT - Income Tax

Unaccounted cash credit - Held that - No addition can be made on the basis of such dumb documents. There is no evidence that assessee is in the money lending activity. The document does not contain any date so that the same can be taxed in the year under consideration. Moreover, Mr. Navin Chand is not available to verify. Department also did not take any steps to trace out the details from the cheque impounded like the Bank account details and further whereabouts of Mr. Navin Chand. In the absence of any corroborative evidence, the statement made by assessee has to be accepted. The documents can only be termed as dumb documents. Hence, the addition cannot be sustained on the basis of same. - Decided in favour of assessee. Payment to a political party disallowed - Held that - No clear explanation was offered by the appellant either at the stage of the survey proceedings or post survey proceedings. During the assessment proceedings, it was briefly explained that the amounts were paid subsequently and recorded in the cash book. However, no cash book was furnished before the AO and as such the same was treated as unexplained investment in the hands of the appellant. During the appellate proceedings, the appellant did not elaborate on the issue, except referring to the statement of the fact where in it was merely mentioned that payments were denied. No further explanation was offered as regards to the payments if the same, to a political party. In the absence of a clear explanation with required evidence, the argument of the appellant is not acceptable. - Decided against assessee. Deletion of investment in house - Non production of books of accounts - Held that - After perusing the detailed order of Ld. CIT(A) and submission by learned D.R. and A.R., we are of the opinion that Ld. CIT(A) should have deleted the additions himself without directing the A.O. to examine and allow. If A.O. refuses to examine/consider the evidence furnished by assessee when matter was remanded by CIT(A), there is no point in directing the A.O. again. Be that as it may, we do not find any merit in Revenue contentions. Assessee has placed on record the consequential order passed by A.O. wherein A.O. accepted the investments. Therefore, on facts there is no merit in Revenue contentions. - Decided in favour of assessee.

Summary

Issues:
1. Unexplained investments/loans advanced
2. Unexplained investments in construction of house at Kavuri Hills
3. Unexplained investments in the form of donations to political parties

Analysis:

Issue 1: Unexplained investments/loans advanced
The Assessing Officer (AO) disbelieved the explanation of the assessee regarding a loan of Rs. 5,00,000 advanced to Mr. Navin Chand, based on a promissory note and a blank cheque found during a survey. The AO treated this amount as unexplained investment. The CIT(A) confirmed this addition, stating that the appellant failed to provide a reasonable explanation for the transaction, leading to the presumption that the amount was indeed lent by the appellant. However, the ITAT disagreed, noting that there was no evidence of money lending activity by the assessee and that the documents lacked crucial details like dates. As Mr. Navin Chand's whereabouts were unknown and the department did not verify the impounded cheque, the ITAT concluded that the addition could not be sustained solely based on these insufficient documents.

Issue 2: Unexplained investments in construction of house at Kavuri Hills
The AO added Rs. 24,12,341 as unexplained investment in a property jointly owned by the assessee and his wife, as they failed to explain the sources of the investment adequately. The CIT(A) directed the AO to verify the sources through the bank accounts and books of account. The ITAT found that the CIT(A) should have deleted the additions without further verification, especially since the AO had already accepted the investments based on subsequent evidence provided by the assessee. Consequently, the ITAT dismissed the Revenue's contentions and partly allowed the assessee's appeal.

Issue 3: Unexplained investments in the form of donations to political parties
During a survey, a payment of Rs. 5,45,000 to a political party was noted, which the assessee failed to explain satisfactorily. The CIT(A) upheld this addition as unexplained investment, as the appellant did not provide clear explanations or supporting evidence. The ITAT, finding no counter to the CIT(A)'s findings, confirmed the addition.

In conclusion, the ITAT partially allowed the assessee's appeal and dismissed the Revenue's appeal, emphasizing the need for clear explanations and supporting evidence to substantiate investments and payments in such cases.