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2019 (2) TMI 1433 - AT - Income TaxAssessment u/s 153A - Addition u/s 68 - HELD THAT - CIT(A) has rightly admitted the additional evidences produced by the assessee under Rule 46A of the IT Rules. We further note from the evidence filed that the share applications were received through banking channel. All share applicant companies are duly assessed to tax and are existing companies with annual returns filed under the Companies Act also. The summons / notices issued by the revenue had been duly served on these parties, and their failure to respond to the summons merely cast the onus on the assessee to establish the transactions. The assessee filed copies of share application forms received from the share applicant companies, bank statements evidencing the receipt of share application money, and PAN details of the applicant companies. Thus, the primary onus stood discharged by the assessee. Therefore, it cannot be concluded that these parties are non-existent or that the share application money received was bogus. There is nothing on record to suggest that the finding of the revenue that the share applicant companies could not be found at the given addresses, was confronted to the assessee. The issue of share premium raised by the revenue in the assessment order to doubt the genuineness of share capital raised also cannot be held against the assessee as the assessee was never required to explain or justify this matter. No evidence was found in the search to establish that the share capital raised was not genuine. Unaccounted commission paid on the accommodation entry of share application - HELD THAT - We note that there is no evidence to support the allegation of the revenue that commission was paid to raise share capital. The addition was without any basis, hence, Ld. CIT(A) has rightly deleted the addition on this ground. Even otherwise, we uphold the action of the Ld. CIT(A) on the deletion of addition of share capital u/s. 68. Disallowance of expense of forfeited advance for purchase of land - HELD THAT - Real estate developers usually buy land stock from farmers at agreed rates. Cash advances are given to the prospective seller landowners to book the properties. Sometimes, dispute arise between farmers and developers as to the terms of the sale. In such circumstances, the agreements fall through and the amounts of advances given are forfeited by the sellers. It is usual practice in the real estate business. The fact of payment is not disputed, at least there is no evidence that the payments were not made. Thus, the loss was made in the ordinary course of real estate business of assessee and was also incidental to the said business. In these circumstances, the claim is allowable loss/ expenditure u/s. 37(1) of the Act and hence, the disallowance made was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Addition on account of unaccounted purchases of coal - HELD THAT - Assessee carried on unaccounted business of purchase / manufacture and sale of katha. On this count, the assessee has admitted additional net income of ₹ 6,00,00,000/- during this assessment year and disclosed in the return filed as income from other sources. The undisclosed manufacture of katha obviously involved undisclosed purchase of the coal, which was used in the manufacturing process. The said purchase of coal was expenditure incurred for the manufacturing of katha. It is not the case that the coal was not used for manufacture. As the net income from undisclosed business was admitted, no separate addition on account of purchase of coal is unwarranted. Therefore, the addition made was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute. Addition on account of unaccounted transactions in the seized documents - HELD THAT - we find that the income from undisclosed manufacture and sale of katha and undisclosed income from sale of real estate to be taxed, based on the documents seized, amounted to ₹ 8,05,91,893/-. As against this amount the additional income offered to tax was ₹ 8,10,63,320/-, i.e. ₹ 7,30,63,320/- in the hands of the assessee and ₹ 80,00,000/- in the hands of M/s Raj Katha Products Pvt. Ltd. an associate concern. However, the calculation made by the AO suffers from mistakes as pointed out by both the parties. However, there is no case bringing additional income to tax. Therefore, the addition made by the AO was rightly deleted by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute. Addition on account of difference between income being admitted by the assessee in his statement recorded at the time of search u/s. 132(4) and the income disclosed in the return - HELD THAT - We note that the AO has himself accepted that the undisclosed income based on transactions recorded in seized documents came to ₹ 9,34,79,821/-. Thus, the question of any further addition with regard to the undisclosed income as per the seized documents does not arise. Hence, the addition made cannot be legally sustained and therefore, was rightly deleted by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Addition on account of unexplained sources - HELD THAT - CIT(A) has rightly held that the addition made by the AO based on mere statement of the director of the assessee company is not backed by any evidence and the unaccounted income detected during search has already been offered to tax. Hence, he rightly held that the addition made by the AO is not legally sustainable and accordingly, deleted the addition in dispute, which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute and reject the ground raised by the Revenue
Issues Involved:
1. Admission of additional evidence and deletion of additions made on account of unexplained cash credit. 2. Deletion of additions made on account of income from unexplained sources. 3. Deletion of addition made on account of unaccounted manufacture and sale of katha. 4. Deletion of addition made on account of difference between income admitted in the statement recorded at the time of search and the income disclosed in the return. 5. Deletion of addition made on account of unaccounted transactions in the seized documents. 6. Deletion of addition made on account of unaccounted commission. 7. Deletion of addition made on account of disallowance of expense of forfeited advance for the purchase of land. Detailed Analysis: 1. Admission of Additional Evidence and Deletion of Additions Made on Account of Unexplained Cash Credit: The CIT(A) admitted additional evidence under Rule 46A, which included bank statements, ITRs, confirmations of loans, and other relevant documents. The CIT(A) found that the assessee had discharged the primary onus under section 68 of the Income Tax Act by providing sufficient documentation to prove the identity, creditworthiness, and genuineness of the transactions. The additional evidences were referred to the AO during appeal proceedings, and the remand report was obtained. The CIT(A) concluded that the share applicants were genuine and that the transactions were legitimate, leading to the deletion of the addition of ?1,50,00,000/-. 2. Deletion of Additions Made on Account of Income from Unexplained Sources: The CIT(A) deleted the addition of ?1,00,04,952/- made on account of income from unexplained sources, noting that the documents pertained to M/s Raj Katha Products P Ltd and that the additional income had already been offered to tax by the said company. The CIT(A) found no justification for taxing the same amount in the hands of the assessee. 3. Deletion of Addition Made on Account of Unaccounted Manufacture and Sale of Katha: The CIT(A) deleted the addition of ?1,02,32,074/- on account of unaccounted transactions, noting that the income from undisclosed manufacture and sale of katha had already been admitted and offered to tax by the assessee. The CIT(A) found that the AO's calculation of short declaration of income was erroneous and not supported by evidence. 4. Deletion of Addition Made on Account of Difference Between Income Admitted in the Statement Recorded at the Time of Search and the Income Disclosed in the Return: The CIT(A) deleted the addition of ?1,22,77,495/- made on account of the difference between the income admitted in the statement recorded at the time of the search and the income disclosed in the return. The CIT(A) found that the statement recorded under section 132(4) of the Act had no evidentiary value unless corroborated by evidence found during the search. The CIT(A) noted that the actual working of undisclosed income was lower than the rough estimate made during the search, and the addition made by the AO was not sustainable. 5. Deletion of Addition Made on Account of Unaccounted Transactions in the Seized Documents: The CIT(A) deleted the addition of ?73,06,000/- on account of unaccounted purchases of coal, noting that the undisclosed manufacture of katha involved undisclosed purchase of coal, which was already accounted for in the additional income offered by the assessee. The CIT(A) found that no separate addition was warranted as it would result in double taxation. 6. Deletion of Addition Made on Account of Unaccounted Commission: The CIT(A) deleted the addition of ?75,000/- made on account of unaccounted commission, noting that there was no evidence to support the AO's allegation that commission was paid to raise share capital. The CIT(A) found that the addition was based on mere suspicion and not supported by any material evidence. 7. Deletion of Addition Made on Account of Disallowance of Expense of Forfeited Advance for Purchase of Land: The CIT(A) deleted the addition of ?74,67,928/- made on account of disallowance of expense of forfeited advance for the purchase of land, noting that the loss was incurred in the ordinary course of business and was allowable under section 37(1) of the Act. The CIT(A) found that the advances were genuine and the forfeiture was a business loss. Conclusion: The Tribunal upheld the CIT(A)'s order, finding no merit in the Revenue's appeals. The Tribunal noted that the CIT(A) had rightly admitted the additional evidence and deleted the additions made by the AO, as the assessee had discharged the primary onus and the additions were not supported by any material evidence. All three appeals filed by the Revenue were dismissed.
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