2019 (10) TMI 1194 - AT - Income Tax

Unexplained investment in Gold Jewellery u/s 69 - HELD THAT - CIT(A) after examining the affidavit and evidence furnished and after calling for a remand report from the AO, accepted the assessee s contention with regard to the gold received at the time of marriage and also in the possession of the father-in-law of the assessee. However, in respect of the gold allegedly belonging to the mother-in-law of the assessee Smt. E. Padmavathamma is concerned, he did not accepted the contention of the assessee as at the time of search, Smt. Padvavathamma was residing with her son at Kurnool and the gold belonging to her mother-in-law was in the locker at Kurnool. Since she was not residing with her son at Hyderabad, entire jewellery could not have been kept in the locker at Hyderabad. He therefore, confirmed the addition to the extent of ₹ 14,55,000/-. Though the learned Counsel reiterated the submissions made before the authorities below, we are not convinced with the ownership of the jewellery of Smt. E. Padmavathamma as the jewellery found at the time of search was without any corroborative evidence. Therefore, ground of appeal No.3 against such addition is rejected. Addition u/s 56(2)(vii)(c)(i) - shares were allotted to the assessee without any or valid consideration - HELD THAT - A loan cannot be considered as a benefit received by the assessee without any consideration. In view of the above, what can be brought to tax is only the lease rental receivable by the assessee for the relevant financial year. The AO is therefore directed to compute the lease rental in the respective relevant A.Ys and bring it to tax. As regards amount as retained towards the TDS brought to tax as income from other sources , the addition to that extent is confirmed. Similarly in the A.Y 2012-13, it is only lease rental that is liable to be taxed. As regards the sale consideration of ₹ 24,17,976 is concerned, the assessee has claimed it to be sale consideration on sale of agricultural land. AO is therefore, directed to verify whether the said land was recorded was agricultural land both at the time of the purchase of the property and also at the time of the sale and if it is found to be recorded as agricultural land, then the sale consideration cannot be brought to tax in A.Y 2012-13. Therefore, the grounds of appeal for the A.Ys 2011-12 and 2012-13 against the additions are partly allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of unexplained investment in gold jewelry.
2. Addition under Section 56(2)(vii)(c)(i) of the Income Tax Act.
3. Treatment of lease rental and sale consideration.

Detailed Analysis:

1. Addition of Unexplained Investment in Gold Jewelry:
During a search, gold jewelry worth ?2,26,26,455/- was found. The assessee's husband admitted additional income of ?1,36,47,165/- after excluding ?36,52,835/- transferred through RTGS. The Assessing Officer (AO) brought the unexplained jewelry to tax. The assessee claimed that the jewelry was part of family gifts and her "Sthridhan." Affidavits from her father, father-in-law, and mother-in-law were submitted. The Commissioner of Income Tax (Appeals) [CIT (A)] accepted the explanation for jewelry received at marriage and from the father-in-law but not for the mother-in-law's jewelry, as she resided in Kurnool. The addition of ?14,55,000/- was confirmed. The tribunal upheld this addition, rejecting the assessee's appeal on this ground.

2. Addition under Section 56(2)(vii)(c)(i) of the Income Tax Act:
The AO treated shares received by the assessee from M/s. Sai Sudhir Energy Ltd. (SSEL) as income under Section 56(2)(vii)(c)(i), arguing they were received without consideration. The CIT (A) enhanced the income for AY 2011-12 and partly allowed the appeal for AY 2012-13, treating shares and TDS retained as income. The tribunal found that shares were allotted as consideration for lease rent per the lease deeds dated 16.03.2011 and 17.03.2011. The tribunal held that the shares were not received without consideration, thus additions under Section 56(2)(vii)(c)(i) were not sustainable. The tribunal directed the AO to compute lease rental for the relevant years and bring it to tax.

3. Treatment of Lease Rental and Sale Consideration:
The AO treated the aggregate value of shares and sale consideration as taxable income, reducing it by the cost of acquisition. The CIT (A) observed that the lease deeds were converted into a sale deed, and the sale consideration was ?24,17,976/-. The tribunal found that the lease rental agreed upon in the lease deeds should be brought to tax and not the entire value of shares. The tribunal directed the AO to verify if the land was recorded as agricultural at the time of purchase and sale. If confirmed, the sale consideration should not be taxed for AY 2012-13.

Conclusion:
The tribunal partly allowed the assessee's appeals for both AYs 2011-12 and 2012-13 for statistical purposes, directing the AO to compute lease rental and verify the nature of the land. The additions under Section 56(2)(vii)(c)(i) were not upheld, but the addition of ?1,06,75,383/- retained towards TDS was confirmed. The appeal against the addition of unexplained gold jewelry was rejected.