2017 (5) TMI 778 - AT - Income Tax

Addition on statement made at the time of survey action u/s. 133A - Held that - There is nothing on record to show that the statement of the assessee was recorded under coercion or threat. In such circumstances the onus shifts to the assessee to prove that the statement given by him was wrong which is not the situation in the instant case. The statement of Mr. Mangilal Devashi was recorded u/s.132(4) of the Act which has got evidentiary value and as per that statement also the amount was given by the assessee who had accepted it as his concealed income. As regards the statement made by the assessee during the course of survey the CIT(A) Central VIII Mumbai in his aforesaid order in case of the assessee for AY.2004-05 has held that the statement of the assessee is on oath and is based on the entries recorded in the impounded documents. Accordingly we do not find any infirmity in the order of CIT(A). Accrued interest on the loans advanced and investments - Held that - From the record we found that in terms of documents found during course of survey u/s.133A the AO found that assessee has not disclosed interest accrued on KVPs investment in FDs loans and advances and interest of loan advance to Shri M Joshi. Accordingly AO calculated interest on these deposits / investment / KVP and made the addition. No explanation was filed by assessee in support of these not declaring income on these FDs and KVPs etc. accordingly CIT(A) confirmed the action of the AO after having detailed observation at para 5. Nothing was brought to our notice by learned AR so as to persuade us to deviate from the findings recorded by lower authorities accordingly ground raised by assessee is dismissed. Disallowance u/s.14A with Rule 8D - Held that - Since assessment year involved is 2006-07 which is prior to insertion of Rule 8D therefore we direct the AO to restrict the disallowance u/s.14A to the extent of 5% of the dividend income. We direct accordingly. Short term capital gain OR business income - Held that - CIT(A) has dealt in great detail with each and every script dealt with by the assessee its magnitude turn over and the frequency of purchases and sales and thereafter arrived at a conclusion that assessee s claim of short term capital gain was not correct and held the same as business income. The detailed finding so recorded by CIT(A) has not been controverted by learned AR by bringing any positive material on record accordingly we do not find any reason to interfere in his findings. Addition on account of deemed rent - Held that - AO 5, 75, 408/-. We direct accordingly. Disallowance of set off of loss incurred in respect of speculation business business loss and short term Capital Loss - Held that - CIT(A) has recorded detailed finding for not allowing set off of such loss after observing that assessee has not filed relevant details either before the AO or before the CIT(A). CIT(A) also observer that even during the appellate proceedings assessee has not furnished necessary details / explanation / submission supported by the documentary evidences. Accordingly he held that assessee has not been able to discharge onus cast upon him in this regard. The detailed finding recorded by the CIT(A) at para 8.3.1 to 8.3.3 have not been controverted by learned AR by bringing any positive material on record. Accordingly we do not find any reason to interfere in the order of CIT(A) for not allowing set off of loss

Summary

Issues Involved:
1. Period of Limitation for Assessment Order
2. Merit of Addition of ?3,06,87,960/-
3. Addition of ?5,91,802/- on Notional Interest of Kisan Vikas Patra and Other Investments
4. Disallowance under Rule 8D for Section 14A
5. Treatment of Short Term Capital Gain as Business Income
6. Addition of ?1,68,000/- on Account of Deemed Rent
7. Disallowance of ?29,96,180/- under Section 14A Read with Rule 8D
8. Allowance of Set Off and Carry Forward of Losses

Detailed Analysis:

1. Period of Limitation for Assessment Order
The assessee challenged the validity of the assessment order on the grounds that it was barred by the period of limitation. The CIT(A) and the Tribunal upheld that the assessment order dated 29.12.2010 was within the period of limitation as per Section 153(2A) of the IT Act, which allowed up to 31.12.2010 for passing the fresh assessment order. The Tribunal found no merit in the assessee's contention regarding the limitation period.

2. Merit of Addition of ?3,06,87,960/-
The assessee was aggrieved by the addition of ?3,06,87,960/-. The Tribunal noted that the amount of ?2,17,50,000/- was admitted by the assessee as unexplained money during a survey. The CIT(A) and the Tribunal found that the statement recorded during the survey had great evidentiary value and upheld the addition based on the assessee's own admission during the survey.

3. Addition of ?5,91,802/- on Notional Interest of Kisan Vikas Patra and Other Investments
The AO made additions based on accrued interest on KVPs, FDs, and loans, which the assessee had not declared. The CIT(A) confirmed these additions, noting that the assessee failed to provide any explanation or evidence to support the non-declaration of such income. The Tribunal upheld the CIT(A)'s decision, finding no reason to deviate from the lower authorities' findings.

4. Disallowance under Rule 8D for Section 14A
The CIT(A) upheld the AO's disallowance of ?3,34,788/- under Section 14A read with Rule 8D, relating to exempt income. The Tribunal, however, directed the AO to restrict the disallowance to 5% of the dividend income, as the assessment year involved was prior to the insertion of Rule 8D.

5. Treatment of Short Term Capital Gain as Business Income
The AO treated the short term capital gain of ?80,33,589/- as business income due to the volume and frequency of transactions. The CIT(A) upheld this treatment, noting the substantial transactions and the use of borrowed funds. The Tribunal found no reason to interfere with the CIT(A)'s findings.

6. Addition of ?1,68,000/- on Account of Deemed Rent
The assessee challenged the addition on account of deemed rent for properties in Deolali and Ahmedabad. The CIT(A) confirmed the AO's addition, noting the absence of any evidence to support the assessee's claim that the properties were un-tenantable. The Tribunal upheld the CIT(A)'s decision, finding no reason to deviate from the findings.

7. Disallowance of ?29,96,180/- under Section 14A Read with Rule 8D
The AO disallowed ?29,96,180/- under Section 14A read with Rule 8D, which the CIT(A) confirmed. The Tribunal, however, directed the AO to restrict the disallowance to the amount of exempt income, i.e., ?5,75,408/-, in line with several judicial precedents.

8. Allowance of Set Off and Carry Forward of Losses
The assessee claimed a loss of ?1,30,69,693/- for set off and carry forward. The CIT(A) disallowed the claim due to the lack of supporting evidence. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to provide necessary details and evidence to substantiate the claim.

Conclusion:
The Tribunal dismissed the appeal in ITA No.2599/Mum/2014 but allowed the appeals in ITA No.2444/Mum/2011, ITA No.8274/Mum/2011, and ITA No.2598/Mum/2014 in part for statistical purposes, directing the AO to make specific adjustments as indicated. The order was pronounced on 08/05/2017.