2018 (10) TMI 1499 - AT - Income Tax

Addition of sum received towards refund of loan as undisclosed income - the same amount used in purchase of diamonds and the sales proceeds of the said diamonds was declared as income u/s. 132(4) by the appellant and paid taxes thereon - double deduction - Held that - We of a strong conviction that the assessee had merely in the guise of the disclosure made as regards the unaccounted sale value of the diamonds tried to wriggle out of the incriminating notings appearing on the seized document. We are of the considered view that in the backdrop of the aforesaid facts, it can safely be concluded that the cash loan of ₹ 30,00,000/- advanced by the assessee to M/s Vijay Gruh Nirman Pvt. Ltd. was not returned by the said party. We thus, finding ourselves to be in agreement with the view taken by the CIT(A), uphold his order and sustain the addition of ₹ 30,00,000/- in the hands of the assessee. - Decided against assessee Addition of on money for purchase of property - assessee as observed by the CIT(A), from the very beginning had been claiming that the said amount was paid for purchase of diamonds - Held that - We though are in agreement with the A.O that the receipts under consideration viz. Annexure A-11 Page 30-31 did not make any mention that the amounts were paid by the assessee for purchase of diamonds, but then, we cannot also remain oblivious of the fact that the said receipts also did not make any such mention from which it could be safely concluded that the amount was paid by the assessee for purchase of property. We may further observe, that the Affidavit and the confirmation filed by Sh. Vikram Singh Shekhawat also substantiates the fact that the amount was paid by the assessee for purchase of diamonds. We thus, not being able to persuade ourselves to subscribe to the view arrived at by the A.O on the basis of the seized documents viz. Annexure A-11 Page 30-31,thus uphold the order of the CIT(A) and confirm the deletion of the addition of ₹ 42,21,000/- made by the A.O. - Decided against revenue.

Summary

Issues Involved:
1. Addition of ?30,00,000 as undisclosed income from a refunded loan.
2. Addition of ?42,21,000 as undisclosed income related to cash payments.

Issue-wise Detailed Analysis:

1. Addition of ?30,00,000 as Undisclosed Income from a Refunded Loan:
The assessee filed an appeal against the CIT(A)'s order confirming the addition of ?30,00,000 received from Vijay Gruh Nirman Pvt. Ltd. as undisclosed income. The assessee claimed that this amount was used to purchase diamonds, and the sales proceeds of these diamonds were declared as income under Section 132(4) and taxes were paid. The CIT(A) upheld the addition, not accepting the assessee's claim that the cash loan was refunded and used for purchasing diamonds.

During the assessment proceedings, it was submitted that the Chairman of Euro Group disclosed ?13.50 crore, including ?75,00,000 in the name of the assessee, as undisclosed income. The assessee declared ?73,79,868 as undisclosed income from unaccounted diamonds sold to two Surat-based concerns. The AO found certain loose papers during the search, indicating cash payments and loans, which the assessee claimed were used to purchase diamonds.

The AO rejected the claim, stating that the promissory notes did not confirm the repayment of the loan. The CIT(A) also did not accept the claim, noting that the promissory notes were unsigned and retained by the assessee despite the alleged repayment. The Tribunal upheld the CIT(A)'s decision, concluding that the assessee failed to provide evidence of repayment and the claim of using the refunded amount for purchasing diamonds was unsubstantiated. Thus, the addition of ?30,00,000 was sustained.

2. Addition of ?42,21,000 as Undisclosed Income Related to Cash Payments:
The revenue appealed against the CIT(A)'s order deleting the addition of ?42,21,000 made by the AO. The AO had added this amount as undisclosed income, assuming it was "on money" paid for purchasing plots. The assessee contended that the amount was paid to Shri Vikram Singh Shekhawat for purchasing diamonds, and the sale proceeds were declared as income.

The CIT(A) accepted the assessee's claim, noting that the assessee had consistently maintained that the payments were for diamonds. The CIT(A) also considered confirmations from Shri Vikram Singh Shekhawat that the amounts were received for diamonds. The Tribunal agreed with the CIT(A), finding no evidence to support the AO's assumption that the payments were for property. The Tribunal noted that the receipts did not mention property and supported the assessee's claim with confirmations from Shri Vikram Singh Shekhawat. Thus, the deletion of the addition of ?42,21,000 was upheld.

Conclusion:
Both the assessee's and the revenue's appeals were dismissed. The Tribunal confirmed the addition of ?30,00,000 as undisclosed income and upheld the deletion of the addition of ?42,21,000 related to cash payments, agreeing with the CIT(A)'s findings in both instances.