2016 (3) TMI 451 - AT - Income Tax

Applicability of provisions of section 56(1)(vii)(b) - income from other sources - market value of the property for stamp duty purpose is higher than the consideration paid by the assessee - undisclosed investment - Held that - Property at Bhilawan, Lucknow has been shown at ₹ 3 lac stamp duty ₹ 1,74,500/- and legal fees ₹ 10,000/-, total ₹ 4,84,500/- and we do not know from where the CIT(A) has noted the actual sale consideration of ₹ 43,55,200/- in his chart on page No. 23 of his order. Regarding a property at Habibullah Estate, Hazaratganj, Lucknow said to have been acquired by the assessee on 19/10/2006, the value appearing in the above chart is ₹ 20.50 lac stamp duty ₹ 12,68,500/- legal fees ₹ 10,000/- and cost of construction ₹ 1 lac, total ₹ 44,28,500/- but CIT(A) has stated in the chart on page No. 23 of his order that market value of this property is ₹ 1,26,84,600/-. It may be that market value of the property for stamp duty purpose is higher than the consideration paid by the assessee but section 50C is not applicable in respect of acquisition of property and amendment in section 56(1) has been made by the Finance Act, 2015 with effect from 01/04/2014 as per which, if any immovable property is purchased for a consideration which is less than the stamp duty value of the property by an amount exceeding ₹ 50,000/-, addition should be made as income in respect of stamp duty value of such property in excess of the stated consideration. Hence, the provisions of section 56(1)(vii)(b) are not applicable in the present year because the same are applicable from assessment year 2014-15. In the similar manner, for the remaining properties also, the basis of CIT(A) is that market value for stamp duty purposes is higher than the value of consideration paid by the assessee as per purchase deed but such an addition in the present year is not sustainable in the eyes of law unless evidence is brought on record to show that extra price was paid by the assessee to acquire the property in question. In the present case, no such evidence has been brought on record by the A.O. to show that extra price was paid by the assessee to acquire the property in question. Hence, we delete this addition. - Decided in favour of assessee Disallowance of agricultural income - treating the same to be from undisclosed source - Held that - an amount of ₹ 20,000/- per bigha per anumn can be considered as agricultural income and on this bass, out of total amount received from these two persons of ₹ 12.24 Lacs, an amount of ₹ 6.00 Lacs should be considered agricultural income. The balance land is about 40 Bighas because one hectare is equal to about 6.2 Bighas. Hence total 11.737 Hectares of land is about 70 Bighas. After excluding 30 Bighas from it, the balance land is about 40 Bighas. From this balance land, income of ₹ 8.00 Lacs should be considered as agricultural income on the same basis of ₹ 20,000/- per Bigha per anumn. In this manner, total agricultural income of ₹ 14.00 lacs out of the claim of ₹ 35.25 Lacs deserves to be accepted. - Decided partly in favour of assessee Addition on unsecured loan from Shri C. P. Goel - Held that - In remand proceedings, summon u/s 131 issued by the A.O. was served on Shri C. P. Goel and reply was filed by him directly to the A.O. in which he has confirmed that this amount of loan was given by him to the assessee. This also establishes his identity. He also requested the A.O. to depute some body for recording his Statement at his residence but the A.O. did not do so but under these facts, his identity cannot be doubted. Regarding his creditworthiness, this fact that he was enjoying overdraft of ₹ 40,85,584.29 on 26.03.2007 as per Bank Statement of Shri C. P. Goel from Bank of India, Indira Nagar Branch, in our considered opinion, his credit worthiness for advancing loan of ₹ 39.50 Lacs to the assessee also deserves to be accepted. Regarding non providing of detail of Cheque Nos. etc., it is worth noting that it is stated by Shri C.P. Goel in his letter dated 18.09.2014 that he is suffering from Glaucoma and Hernia and was advised complete bed rest. Medical certificate is also enclosed with this letter and therefore only because details of Cheque Nos. etc. could not be provided by him because of his bad health position, no adverse inference can be drawn. Therefore, under these facts, it has to be accepted that the assessee has been able to establish the identity of the lender and his creditworthiness as well as genuineness of the transaction and therefore the addition u/s 68 is not justified.- Decided in favour of assessee Addition as Sundry Creditors for expenses - Held that - In Para 6.6, the CIT(A) has noted down three outstanding amounts of ₹ 1,37,217/- from Vijaya Bank, ₹ 86,500/- from HDFC Bank and ₹ 96,954/- from Standard Chartered Bank. The relevant bank statements are available in paper book to which our attention was drawn and therefore, these three credit amounts has to be accepted as explained. Regarding the balance amount of ₹ 2.10 lac, it is noted by CIT(A) that this amount was stated to be not traceable. Hence, we confirm this amount of ₹ 2.10 lac and delete the balance amount of ₹ 3,20,715/-.- Decided partly in favour of assessee

Summary

Issues Involved:
1. Addition of Rs. 81,29,522 based on 20% of all assets.
2. Addition of Rs. 35,25,000 by disallowing agricultural income.
3. Validity of reassessment proceedings.
4. Addition of Rs. 48,650 as provisions and expenses payable.
5. Addition of Rs. 39.50 lakhs in respect of unsecured loan from Shri C. P. Goel.
6. Addition of Rs. 12,41,524 as unsecured loans from State Bank of India and Standard Chartered Bank.
7. Addition of Rs. 5,30,765 as sundry creditors for expenses.
8. Addition of Rs. 35,25,000 by disallowing agricultural income in reassessment proceedings.
9. Deletion of Rs. 1,28,83,028 by CIT(A) as unsecured loans from others.

Detailed Analysis:

1. Addition of Rs. 81,29,522 Based on 20% of All Assets
The assessee contested the addition of Rs. 81,29,522 made by the AO by taking 20% of all assets shown in the balance sheet. The AO had added this amount on an ad hoc basis without substantial evidence. The Tribunal found that the AO's addition was based on assumptions and conjectures without any material evidence. The CIT(A) also did not provide a valid basis for the addition, and the Tribunal deleted the addition, allowing the assessee's grounds.

2. Addition of Rs. 35,25,000 by Disallowing Agricultural Income
The assessee claimed agricultural income of Rs. 35,25,000, which was disallowed by the AO and treated as income from undisclosed sources. The Tribunal examined the documentary evidence, including purchase deeds and agreements for agricultural land. It concluded that part of the agricultural income should be accepted based on reasonable estimates. The Tribunal accepted Rs. 14,00,000 as agricultural income and allowed the grounds partly.

3. Validity of Reassessment Proceedings
The assessee did not press the grounds challenging the validity of the reassessment proceedings. Consequently, these grounds were rejected as not pressed.

4. Addition of Rs. 48,650 as Provisions and Expenses Payable
The assessee did not press this ground either, and it was also rejected as not pressed.

5. Addition of Rs. 39.50 Lakhs in Respect of Unsecured Loan from Shri C. P. Goel
The AO added Rs. 39.50 lakhs as unexplained unsecured loans. The assessee provided evidence of repayment by account payee cheques and bank statements. The Tribunal found that the identity and creditworthiness of Shri C. P. Goel were established through bank overdrafts and confirmation letters. The Tribunal deleted the addition, allowing the grounds.

6. Addition of Rs. 12,41,524 as Unsecured Loans from State Bank of India and Standard Chartered Bank
The CIT(A) had deleted the addition of Rs. 1,28,83,028 out of total unsecured loans of Rs. 1,41,24,552, recognizing them as loans from banks. The Tribunal found that the remaining Rs. 12,41,524 was also from banks and deleted this addition as well, allowing the ground.

7. Addition of Rs. 5,30,765 as Sundry Creditors for Expenses
The CIT(A) had noted three amounts: Rs. 1,37,217 from Vijaya Bank, Rs. 86,500 from HDFC Bank, and Rs. 96,954 from Standard Chartered Bank. The Tribunal found that these amounts were verifiable from bank statements and deleted these additions. However, it confirmed the addition of Rs. 2,10,000, which was not traceable. The ground was partly allowed.

8. Addition of Rs. 35,25,000 by Disallowing Agricultural Income in Reassessment Proceedings
The Tribunal directed that in the reassessment proceedings, the AO should start with the income assessed in the original assessment order and make necessary adjustments. This would ensure that the addition of Rs. 35,25,000 does not figure again, as it was already partly resolved. The ground was disposed of accordingly.

9. Deletion of Rs. 1,28,83,028 by CIT(A) as Unsecured Loans from Others
The Revenue contested the deletion of Rs. 1,28,83,028 by CIT(A), which was part of the total addition of Rs. 1,41,24,552. The Tribunal upheld the CIT(A)'s decision, noting that the loans were from various banks and were verifiable. The appeal by the Revenue was dismissed.

Conclusion
The Tribunal partly allowed the appeals of the assessee and dismissed the appeal of the Revenue. The significant additions made by the AO were either deleted or reduced based on verifiable evidence and reasonable estimates.