2015 (6) TMI 203 - AT - Income Tax

Undisclosed investment - CIT(A) deleted the addition - Held that - Appellant had sufficient amount of cash available as per the cash book so as to enable to him to make the investment of the above amounts. Regarding the objection of the AO, that the cash withdrawn might have been spent by the appellant somewhere else and there was no chance of the appellant having cash in hand with him sufficient enough to make cash deposits with the bank from which the investment has been made by the appellant, find that the objection of the AO is not supported by any hard evidence and is based on general observation. Since there is no cogent material before the AO to support his above suspicion of the appellant having spent the cash balance on some other activities, a relief of ₹ 6,63,300/- correctly allowed - Decided against revenue. Unaccounted investment in FDR - CIT(A) deleted the addition - Held that - The cash account of the appellant and from the perusal of the cash account, it is find that there was sufficient balance in the cash account on 5/1/05 from which the cash deposit of ₹ 35,000/-could have been made. The AO has no material to justify his suspicion that earlier cash withdrawals from bank have been spent or invested by the appellant somewhere else, and in the absence of such material, no adverse view can be taken against the appellant. Therefore allow this ground of appeal and delete the addition for ₹ 10 lakhs. - Decided against revenue. Addition to loan given to Smt. Rita Dhingra - CIT(A) deleted the addition - Held that - The loan transaction, as entered into between the parties, is to be verified with reference to the question whether this transaction of loan involves transfer of funds which needs to be explained. In this case, there is nothing which needs to be explained when source of the same FDR has already been considered by the AO himself in his order. So far as the remaining amount of ₹ 1,05,000/- is concerned, the AO has accepted the source of this being out of 3 months rent @ ₹ 35,0001- per month collected and credited in bank account of appellant wherein his wife Mrs. Rita Dhingra was a joint holder of account and also this rent has been declared by the appellant in his return of income for A.Y. 2005-06. Accordingly, the entire addition for ₹ 11,05,000/- being explained is directed to be deleted. - Decided against revenue. Disallowance of drawing for personal expenses - CIT(A) deleted the addition - Held that - There is no difference in the accounted personal expenses as per the information given during assessment proceedings and therefore, source of the above personal expenses stand explained in view of reconciliation of cash flow statement. Regarding the balance amount of ₹ 1,29,521/-the AO has not raised any objection on the appellant s explanation in his report. It is observed that this balance amount for ₹ 1,29,521/- consists of LIC Premium for ₹ 1,07,4711-; mediclaim insurance for ₹ 17,995/- and Travel Insurance for ₹ 4055/-. All these payments have been made through cheques from the Account of G&J Apparels and are, therefore, explained. Therefore AO is directed to delete the addition - Decided against revenue. Addition to unexplained cash credits - CIT(A) deleted the addition - Held that - AO has not considered the cash withdrawals of ₹ 1,89,000/- which he himself has taken in para-vii of the remand report and there is no reason given by the AO for omitting the above withdrawals to work out the availability of the cash deposits. Accordingly, the explanation of the appellant regarding these source of cash deposits stand explained and there is no justification for addition of ₹ 1,44,000/- - Decided against revenue.

Summary

Issues:
Appeal against deletion of additions by CIT(A) - Undisclosed investment, FDR investment, loan given, personal expenses, unexplained cash credits, admission of additional evidences under Rule 46A.

Undisclosed Investment:
The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) on undisclosed investments. The CIT(A) considered the AO's objections and the appellant's explanations. The CIT(A) found that the appellant had sufficient cash available to make the investments, and the AO's suspicions lacked concrete evidence. Consequently, the CIT(A) allowed relief on the undisclosed investments, leading to the deletion of the additions.

FDR Investment:
Regarding the investment in Fixed Deposit Receipt (FDR), the AO questioned the absence of the FDR in the appellant's statement of affairs. However, the CIT(A) noted that the FDR was credited to the appellant's account by the appellant's wife, with supporting documentation. The CIT(A) verified the cash account, confirming sufficient funds for the cash deposit related to the FDR. The CIT(A) found no valid objections from the AO, leading to the deletion of the FDR investment addition.

Loan Given:
The dispute over a loan given to the appellant by his wife was also addressed. The CIT(A) examined the ledger account and confirmed the credit of the loan amount by the appellant's wife. The source of funds for the loan was previously considered by the AO, and the CIT(A) found no unexplained elements in the transaction. Consequently, the entire addition related to the loan was directed to be deleted.

Personal Expenses:
Regarding the addition made for personal expenses, the CIT(A) analyzed the appellant's cash flow statement and cash account. The CIT(A) found discrepancies in the AO's assumptions about the nature of personal expenses and their accounting. By reconciling the cash flow statement, the CIT(A) explained the source of the personal expenses, leading to the deletion of the addition for personal expenses.

Unexplained Cash Credits:
The AO had not considered certain cash withdrawals while assessing the cash credits, leading to an addition for unexplained cash credits. The CIT(A) reviewed the appellant's explanations and found no justification for the addition. Consequently, the CIT(A) granted relief by deleting the addition for unexplained cash credits.

Admission of Additional Evidences under Rule 46A:
The Revenue contended that the CIT(A) erred in admitting additional evidence under Rule 46A. However, the CIT(A) had obtained a remand report from the AO and considered the objections raised. The CIT(A) justified the admission of additional evidence based on the remand report and the merits of the case. Ultimately, the CIT(A) dismissed the Revenue's ground related to the admission of additional evidence.

In conclusion, the ITAT Delhi upheld the CIT(A)'s detailed and well-reasoned order, finding no flaws. The appeal filed by the Revenue was dismissed, affirming the CIT(A)'s decisions on the various issues raised in the case.