2016 (1) TMI 112 - AT - Income Tax

Unexplained credit entries - Undisclosed income - CIT(A) deleted the addition - Held that - AO has added the unexplained credit entries with the Dena Bank to the tune of ₹ 88,94,266/- as addition to the total income of the assessee. The first appellate authority has observed that AO s inference regarding the assessee filing fabricated bank statement is correct. On merits, the AO took note that all the credits from 25.08.2004 to 07.03.2005 are through cheques/transfer entries. He also took note of the fact that an amount of ₹ 23 lakhs are transfer entries from the bank accounts of the family members of the assessee who were his wife and daughters who were having account in the same branch of the Dena Bank. The remaining credits were through cheques from Smt. Padma Bhandari of ₹ 50,50,000/- , Shri S.S.H. Naqwi of ₹ 9 lakhs, rent of the property ₹ 5,000/-, Shri Sheel Mehta of ₹ 5,90,000/- and income-tax refund of ₹ 49,226/-. In respect to the credit of ₹ 50,50,000/-, we find that the CIT (A) has called for the remand report which has been reproduced (supra in para 5.6 of the CIT (A) s order) wherein, the AO had stated that the said Smt. Padma Bhandari has passed away on 18.04.2008 and the legal heirs of the assessee are not aware of this particular specific information. The AO s suspicion is only based on the fact that on the day the lady has given cheques to the assessee, similar amount was received by the lady on the same day through cheques for which no possible explanation was filed by the assessee. Other than the said observation of the AO, there was nothing to challenge the identity of the lender. The ld. CIT (A) has stated that the assessment of late Smt. Padma Bhandari was completed for AY 2005-06 u/s 143 (3) of the Act and has stated that credits appearing in the bank account of Smt. Padma Bhandari were from the sale consideration of an immovable property, therefore, just because confirmation was not given in respect to lending of this amount which has been repaid during the year, cannot be said to be undisclosed income of the assessee and, therefore, rightly deleted by the ld. CIT (A) which does not require any interference from our side. - Decided in favour of assessee Addition on account of undisclosed credit entry from saving bank account of Dena Bank - CIT(A) deleted the addition - Held that - AO has not made any adverse observation against the transfer of the amount into the account of the assessee. The CIT (A) notes that just because the wife did not file the confirmation of lending the said amount, cannot be the ground to make the addition as income from undisclosed sources when the fact is that Smt. Manjusha (assessee s wife) herself has admitted about the transaction. In the said facts and circumstances of the case, we do not find any merit in the appeal of the revenue on this ground and we uphold the decision of the ld. CIT (A) - Decided in favour of assessee Addition being credit entry in the name of Shri S.S.H. Naqwi and Shri Sheel Mehta - CIT(A) deleted the addition - Held that - CIT (A) has found that the said amount has been an interest free loan by Shri S.S.H. Naqwi to the assessee and the said amount borrowed has been repaid by the assessee also during the year under consideration, therefore, the transactions are genuine and so he directed to delete the same. Likewise, in the case of Shri Sheel Mehta too, an amount of ₹ 5,90,000/- was said to have been given as an advance and the said Shri Sheel Mehta was the tenant of the assessee and has given an advance for the said property. The AO took note of the fact that the said Shri Sheel Mehta later on changed his mind and did not want the property, so the amount of ₹ 40,000/- was taken as commission and the balance amount of ₹ 5,50,000/- was paid back to Shri Sheel Mehta during the same year. In the remand report, the AO had expressed his satisfaction about the repayment of the said advance taken from Shri Sheel Mehta. In the light of the said facts, the CIT (A) has held that the transactions of both the persons were genuine and, therefore, the amount which was credited in assessee s account cannot be termed as income from undisclosed sources and therefore, rightly deleted the said addition. Accordingly, we confirm the action of the ld. CIT (A) - Decided against revenue Addition of an amount credited to the assessee s account by account payee cheques from the assessee s daughters - Held that - Before us, it was contended by the ld. AR that the donors were none other than the grand-parents of the donee. Therefore, according to him, the ld. CIT (A) or the AO should not have brushed aside the fact that grand-parents giving a gift to the grand-daughters is not unusual fact. On the other hand, the ld. DR questioned the creditworthiness of the donors, which according to him, has not been proved by the assessee, so the addition was made. We have heard both the parties and we find that this issue of gift, which is being contended by the assessee, as obtained as a gift to grand-daughters from grand-parents, who in turn has transferred the same to the father (assessee) needs to be de novo considered by the AO. Therefore, we set aside the order of the CIT (A) on this issue and remand the matter back to the file of the AO for de novo consideration of this issue. - Decided in favour of assessee for statistical purposes. Addition on account of unexplained cash peak credit - CIT(A) deleted the addition - Held that - The CIT (A) took note that the purchases of DG set and air-conditioners were through cheques whereas the sale of the said goods were by cash. The ld. CIT (A) took note of the fact that since the sales had taken place on 19.01.2005 and these goods/assets are not reflected in the statement of affairs of the assessee as on 31.03.2005, therefore, he does not doubt the sales and mode of receipt as claimed by the assessee and so he held that there was no justification to hold that the said entries in the account are unexplained and he believed that by the said transaction, an amount of ₹ 20 lakhs of cash was deposited in assessee s account. Ld. DR could not furnish any material before us to controvert the said finding of the ld. CIT (A). In the absence of any other material to contradict the said transactions made by the assessee, we are inclined to uphold the finding of the CIT (A) that ₹ 20 lakhs cash deposited in the assessee s account stands explained and cannot be termed as undisclosed income from unknown sources. - Decided in favour of assessee Addition on account of sale of property - CIT(A) deleted the addition - Held that - Though the copy of the agreement of sale was furnished along with the PAN of the vendee, Shri Ganpat Sharma and the cash receipt of ₹ 2,50,000/- which was made in advance for sale of the roof rights of G-176, Hari Nagar was not accepted by the AO. The assessee brought before the notice of the first appellate authority that the assessee had received ₹ 2,50,000/- in assessment year 2006-07 which has been accepted by the AO in the assessment order passed u/s 143 (3) of the Act. The ld. CIT (A) taking note of the fact that when the AO has accepted the source of ₹ 2,50,000/- in the subsequent year as advance for the roof rights of the property at Jail Road, New Delhi and there was no justification in not accepting the source of this ₹ 2,50,000/- from the sale of the roof rights of the aforesaid property which he had sold in the relevant A.Y. Taking this fact into consideration, the ld. CIT (A) had deleted the said addition. We find that the ld. DR could not controvert this factual aspect that has been brought out in the impugned order. In such a scenario, we have no other option but to uphold the order of the ld. CIT (A). - Decided in favour of assessee Incoming cash as explained in the cash flow statement - Held that - CIT (A) of sustenance of ₹ 10 lacs, we find that he has given a relief of ₹ 26,77,000/- out of ₹ 36,77,000/- of peak credit added from bank accounts of Dena Bank, HSBC and PNB. However, we find that the ld. CIT (A) has accepted the claim of the assessee that he had received ₹ 20 lakhs from the sale of DG set and air-conditioners, ₹ 8 lakhs from sale of property and rent of ₹ 1,44,490/-, sale of roof rights of ₹ 2,50,000/-, thus amounting to ₹ 31,94,490/-. Therefore, once he has accepted the cash of ₹ 31,94,490/- which has come into the bank accounts of the assessee, then maximum sustenance that can be made to the difference of ₹ 36,77,000/- minus ₹ 31,94,490 i.e. ₹ 4,82,510/-. The total expenses/ withdrawals of March as per the cash flow statement submitted by the assessee is only ₹ 1,94,765/- for marriage expenses of his daughter, which, according to us, is also abysmal low figure when considering the assessee s income, status and business which he undertakes. Therefore, the amount of ₹ 4,82,510/- would be a reasonable amount to be sustained - Decided in favour of assessee in part Addition u/s 68 - Held that - if the assessee has not made any entry in his cash book does not mean that the amount deposited in the bank account can be termed as unexplained income of the assessee. Since the matter is being set aside and sent back to the AO for fresh adjudication for the sole ground of the revenue, we are of the opinion that this matter also be remitted back to the file of the AO for fresh adjudication. Therefore, we set aside the order of the CIT (A) and remand the matter back to the AO for de novo assessment. Needless to say, an opportunity of being heard should be provided to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Deletion of additions on account of undisclosed credit entries.
2. Sustenance of addition of credits from assessee's daughters.
3. Deletion of addition on account of unexplained cash peak credit.
4. Deletion of addition on account of sale of property.
5. Admission of additional evidence without following Rule 46A.
6. Deletion of addition of advance against property sale.
7. Sustenance of addition for unexplained cash deposit.

Issue-wise Detailed Analysis:

1. Deletion of Additions on Account of Undisclosed Credit Entries:
The revenue challenged the deletion of additions totaling Rs. 78,40,000/- related to undisclosed credit entries in the Dena Bank account. The CIT(A) deleted the additions based on the remand report, which verified the genuineness of the transactions, including loans from family members and other individuals. The Tribunal upheld the CIT(A)'s findings, noting that the credits were satisfactorily explained through bank transfers and confirmations from lenders. Consequently, the revenue's appeal on this ground was dismissed.

2. Sustenance of Addition of Credits from Assessee's Daughters:
The assessee contested the addition of Rs. 10,00,000/- credited to his account by his daughters, which was sustained by the CIT(A). The Tribunal found that the CIT(A) correctly questioned the creditworthiness of the donors and the genuineness of the transactions, as the gifts were not supported by sufficient evidence. However, the Tribunal remanded the matter back to the AO for a fresh examination of the gift claims, emphasizing the need for a de novo consideration of the issue.

3. Deletion of Addition on Account of Unexplained Cash Peak Credit:
The revenue's appeal against the deletion of Rs. 36,77,000/- related to unexplained cash deposits in various bank accounts was addressed by the CIT(A), who accepted the assessee's explanation of the source of cash, including sales of assets and property. The Tribunal upheld the CIT(A)'s decision, noting that the cash deposits were satisfactorily explained through documented transactions. However, the Tribunal adjusted the sustained addition to Rs. 4,82,510/- after considering the accepted cash inflows.

4. Deletion of Addition on Account of Sale of Property:
The revenue challenged the deletion of Rs. 8,00,000/- related to the sale of property. The CIT(A) found that the sale was genuine and supported by evidence, including the property's reflection in previous years' statements of affairs. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's addition was based on assumptions and lacked substantive evidence to contradict the sale's legitimacy.

5. Admission of Additional Evidence Without Following Rule 46A:
The revenue contended that the CIT(A) admitted additional evidence without following Rule 46A procedures. The Tribunal agreed that the CIT(A) should have provided the AO an opportunity to examine the new evidence. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for fresh consideration, ensuring compliance with Rule 46A.

6. Deletion of Addition of Advance Against Property Sale:
The revenue's appeal against the deletion of Rs. 72,50,000/- related to an advance received for property sale was addressed by the CIT(A), who accepted the assessee's explanation based on the sale agreement and supporting documents. The Tribunal found merit in the revenue's contention that the AO should have been given an opportunity to examine the new evidence. Therefore, the Tribunal remanded the matter back to the AO for fresh adjudication, ensuring a thorough verification of the advance.

7. Sustenance of Addition for Unexplained Cash Deposit:
The assessee's cross-objection against the sustenance of Rs. 1,00,000/- as unexplained cash deposit was addressed by the CIT(A), who found the deposit unexplained based on the cash flow statement. The Tribunal noted that the cash flow statement indicated sufficient cash in hand during the relevant period. Consequently, the Tribunal remanded the matter back to the AO for a fresh assessment, ensuring a comprehensive review of the cash deposit's source.

Conclusion:
The Tribunal dismissed the revenue's appeal for the assessment year 2005-06, partly allowed the assessee's appeal for statistical purposes, and allowed the revenue's appeal and the assessee's cross-objection for the assessment year 2006-07 for statistical purposes. The matters were remanded back to the AO for fresh consideration, ensuring compliance with procedural requirements and thorough verification of evidence.