2018 (3) TMI 732 - AT - Income Tax

Unexplained amount on Google charges - unexplained investments - source of expenditure incurred on behalf of company through credit card - Held that - The assessee is a Director of M/s.HMGT (India) Tours and Travels Private Limited and had used his credit card for making payments on behalf of the private limited company. The expenses incurred by the assessee by using his credit card on behalf of the company, was reimbursed by the private limited company. AO reduced the reimbursement made by the private limited company from the total credit expenditure incurred by the assessee and the difference was considered as unexplained investment. CIT(A) examined the cash deposits and after considering the reimbursement received by the assessee from the company, the balance was treated as unexplained investments. We find the issue has not been properly dealt by the Assessing Officer. The Assessing Officer ought to have considered the source of deposit which had facilitated the credit card payments of the assessee (whether the expenditure is incurred on his behalf or on behalf of the company). Thus in the interest of justice, we are of the view that the matter needs to be examined by the Assessing Officer afresh Unexplained deposits with SBT - Held that - Confirmation letter of the seller was not considered by the Assessing Officer nor by the CIT(A). In the interest of justice and equity, we are of the view that the matter needs to be considered afresh by the Assessing Officer. The Assessing Officer shall take into account the total sale consideration. The amounts the assessee had paid from his bank account and also from the loan account availed by the assessee. Unexplained investment - Held that - The addition of ₹ 19,73,310 by the CIT(A) is an error in view of his findings in para 6.3(i) page 9 of CIT(A) s order . The CIT(A) erroneously had not reduced the relief of ₹ 5,93,000 granted by him in para 6.3(i) of his order. Accordingly, the addition made by the A.O. is reduced to ₹ 13,79,710. No other arguments were raised by the assessee in regard to the addition made by the A.O. amounting to ₹ 19,73,310. Hence ground No.4 is partly allowed by restricting the addition to ₹ 13,79,710 instead of ₹ 19,73,310. It is ordered accordingly.

Summary

Issues Involved:
1. Unexplained amount on Google charges.
2. Unexplained deposit with SBT.
3. Unexplained investment of ?19,73,310.

Detailed Analysis:

Unexplained Amount on Google Charges:

The Assessing Officer (A.O.) added ?10,13,430 as unexplained investment, noting discrepancies in the cash flow statement. The CIT(A) confirmed ?8,36,430 of this amount, recognizing cash deposits totaling ?14,47,232 against the credit card payments, but only ?6,10,802 was reimbursed by the company. The Tribunal found the A.O.'s examination faulty and remanded the issue back to the A.O. for fresh examination, directing the A.O. to verify the source of deposits facilitating the credit card payments. Hence, this ground was allowed for statistical purposes.

Unexplained Deposit with SBT:

The A.O. added ?15,10,000 as unexplained deposits in the State Bank of Travancore (SBT), out of a total credit of ?17,20,000, excluding ?2,10,000 as salary. The CIT(A) upheld this addition, rejecting the assessee's claim of a refund from a property seller due to lack of evidence. The Tribunal, however, noted that the assessee provided bank statements and a confirmation letter from the seller, indicating a refund of ?13,00,000. The Tribunal remanded this issue back to the A.O. to verify the genuineness of this claim. Thus, the addition of ?2,10,000 was confirmed, and the issue of ?13,00,000 was sent back for reconsideration, allowing this ground partly for statistical purposes.

Unexplained Investment of ?19,73,310:

The A.O. added ?19,73,310 as unexplained investments, noting discrepancies in the cash inflow and outflow, including unsubstantiated claims of loans and car sales. The CIT(A) confirmed ?13,79,710 of this amount, granting relief of ?5,93,600 for a car sale. The Tribunal acknowledged the CIT(A)'s error in not reducing the confirmed amount by ?5,93,600 and corrected the addition to ?13,79,710. No further arguments were raised by the assessee. Hence, this ground was partly allowed by restricting the addition to ?13,79,710.

Conclusion:

The appeal was partly allowed for statistical purposes, with issues remanded for fresh examination and corrections made to the confirmed additions. The Tribunal emphasized the need for a thorough verification process by the A.O. to ensure justice and accuracy in the assessment.