2020 (4) TMI 49 - AT - Income Tax

Estimation of house hold expenses - additions challenged on the ground that, assessee is residing in village and supplementing his expenses by agriculture and its by product is arbitrary unjust and excessive - HELD THAT - Though the assessee claims to be an agriculturist but the closure scrutiny of the case reveals that the assessee is co-owner of 300 bighas of land and further, he is into the business of money lending, contract business, therefore, in our view, the order passed by the Ld.CIT(A) was a reasonable order as it merely restricted to ₹ 2,50,000 /-. Hence, we do not find any error in the order of the Ld.CIT(A). Hence, this Ground is dismissed. Addition being loans raised from farmer - HELD THAT - The assessee in the appellate proceedings had filed the affidavits of the farmers and have given the name and addresses to the Ld.CIT(A) for the purpose of the verification of the amount. The Ld.CIT(A) had sent the document along with submissions to the AO, who had given the remand report and had not mentioned anything about the affidavits and the loans. In our view, it is the duty of the AO to examine the affidavits and the deponents of the affidavits to find out the truth in the submissions made in the affidavits. Nothing had been done by the AO no adverse material was brought on record by the AO or by the Ld.CIT(A) in the appellate proceedings. It is a settled position of law that the addition cannot be made on the basis of some cogent and reliable evidence and not on the basis of conjectures and surmises. Accordingly, the Ground No.2 of appeal of assessee is allowed. Addition on the basis of third party statements recorded at the back of assessee - HELD THAT - Despite assessee asking for the statement from the AO and also in the appellate proceedings, neither the statement was provided nor the opportunity to cross-examine Shri Alok Tripati was given to the assessee. Further, we are also of the opinion that the addition of ₹ 2 Lakhs cannot be made merely on the basis of the statement, unless a corroborative evidence/record is found by the AO. For the purpose of the conclusion that no such additions can be made based on the statement given by Mr.AlokTripati as it would be violative of Principle of Natural Justice and rules of fair and transparent adjudication, we may fruitfully rely upon the decision of the Hon ble Supreme Court in the case of Shri Kishinchand Chellaram vs CIT 1980 (9) TMI 3 - SUPREME COURT - Thus we delete the addition. Recycling of loans - Addition on the basis of annexure BK - 15 made during the year - year of assessment - HELD THAT - CIT-DR clearly had submitted that the entries which are subject matter of the Ground No.4, does not pertain to the assessment year under consideration. We have ourselves also examined the record and the paper book filed by the assessee and we found the force in the submissions of the assessee, which was seconded by the Ld.DR. As the addition sought to be added by the AO pertains to the earlier assessment year, therefore, keeping in mind the principle of accrual as mentioned in Section 4 and 5 of the Income Tax Act, we are of the opinion that these additions cannot be made in the year under consideration. Unexplained investment in money lending - HELD THAT - Though the assessee had submitted that the entries do not pertains to the year under consideration, however, when we have examined the record, then we found that no date against these entries were mentioned in the record. As per the Evidence Act, the presumption is required to be drawn against the assessee and it is for the assessee to explain that these entries do not pertain to the year under consideration. The assessee failed to discharging the onus of satisfying the conscious of the AO as well as of the Tribunal that the entries do not pertain to the year under consideration. In view of the above, we do not find any merit and accordingly, the Ground of the assessee appeal is dismissed. Unexplained cash - statement receded u/s.132 of the Act on 03-03-2005 - HELD THAT - The cash was recovered from the possession of the assessee and the assessee sought to explain the recovery of the cash as a payment required to be paid by the assessee on behalf of another firm of his brother pertaining to sand contract. It is difficult to comprehend that when the assessee was neither the partner nor the director nor the owner of the said company then how the cash can be said to be belonging to a third party. In our opinion, this is a plea taken by the assessee just to explain the cash the said plea is required to be rejected as the said plea has been made by the assessee to serve his own purpose without any basis. - Decided against assessee. Addition of security deposit payment - contract run by the six persons jointly - HELD THAT - CIT(A) himself that the aforesaid six notebooks contains similar transactions relating to the business of toll tax collection of the two bridges, the receipts and savings have been divided equally from the contract run by the six persons jointly as above including that by assessee and the payments have been made to PWD equally as mentioned above, there was no justification of adding security deposit payment in the hands of assessee alone. Hence, the addition sustained by CIT(A) at ₹ 1,90,000/- ₹ 2,00,000/- ₹ 3,90,000/- being contrary to the finding given by CIT himself is illegal and arbitrary and may kindly be directed to be treated. Addition for toll bridge contract in which assessee had 167 share - HELD THAT - Since the addition sustained on account of security at ₹ 1,90,000/- is illegal because the assessee held only 1/6 share. As submitted against Ground No.7 it would be in the interest of equity and justice that the addition which can be made out of ₹ 2,00,000/- 1,90,000/- should be limited to l/6th₹ 65,000 /- which is the assessee's share in the toll bridge. Assessment u/s 153C - Addition sustained in the hands of assessee for the contract income earned by other persons Tahir Ali , Mohd Idris - HELD THAT - assessee was liable to be charged for the 1/6th amount found as per the claim of the assessee which in the estimation would come to ₹ 45,832/-. In fact, the similar entries were found in all the six note books found during the course of survey pertaining to toll tax collection of two bridges. In our view, though the assessee claimed that he was entitled for 1/6th share in the toll tax collection of the bridges, but we failed to understand why 6 separate note books were maintained by the assessee in respect to the same business. The plausible answer would be in our understanding that the assessee was maintaining six separate note books with a view to suppress the actual toll collection or the six note books were maintained for the individual shareholders. The onus is on the assessee to prove that six note books were maintained for six partners and simultaneously the onus was also on the Revenue to prove that six note books were maintained for suppressing the toll collection. Therefore, a guess work is required to be done by the Bench and considering the totality of the circumstances and also peculiar facts of the present case, we restrict the addition to ₹ 1,90,000/-. Thus, the assessee gets the relief of ₹ 2 Lakhs. Addition of income earned by Mr.Pradeep Chauhan belongs to assessee - HELD THAT - Addition confirmed by CIT(A) correctly on presumption that income might have been earned by the assessee also when no such paper has been found and seized in the name of assessee in the course of search. Addition sustained for house hold goods - HELD THAT - We have already mentioned about the status of the assessee while dealing with Ground No.1 of the assessee s appeal and concluded that the assessee is a man of sufficient means therefore, the addition made by the AO and confirmed by the Ld.CIT(A) for a tune of ₹ 1,15,000/- is on the lower side, hence, needs no interference by the Tribunal, accordingly, the Ground raised by the assessee are dismissed. Addition making a vague remarks after considering the submissions it is concluded that the assessee could not explain satisfactory the transactions entered on page 1,2, 5,10 to 13 - HELD THAT - So far as the amount of ₹ 5,00,000/-, ₹ 2,08,750/-, ₹ 16,666/- and ₹ 1,00,000/- totaling to ₹ 8,25,416/- are the payments relating to the earlier assessment years and therefore, the same cannot be added in the present assessment year. This fact has duly been verified by the Ld.CIT-DR during the course of argument. Accordingly, the amount of ₹ 8,25,416/- is deleted. With respect to the remaining amount of ₹ 16,03,470/-, during the course of proceedings before lower authorities, it was not disputed that these entries were not mentioned in the record sheet, recovered from the possession of the assessee. The onus is always on the assessee to prove and discharge that the payments made were relating to the business of Shri Suresh Kumar Pandey and brothers. In our view, the amount paid on the face of it appears to have been paid for the purposes of earning the income therefore, the assessee is entitled to the corresponding benefit which has been earned on account of such expenditure. In the absence of any help from any of the parties before us, we are required to make the guess of income which can be included for incurring the expenditure of ₹ 16,03,470/- - for the assessment year 2005-06 no purpose would be served to remand the matter back to the CIT(A) for granting a fresh opportunity for producing the books of account of M/s.Suresh Kumar Pandey and bothers. It would be sufficient if we restrict the addition to an amount of ₹ 6,03,470/- thus, the assessee gets the benefit of ₹ 10 Lakhs and the additions of ₹ 14,98,886/- are deleted. Hence, the Grounds is partly allowed. Addition under section 132 (4A) - unexplained investment - HELD THAT - Additions were made by the lower authorities on the basis of the sale document found during the course of search. The documents on the face clearly gives the name and addresses of the instrument showing the ownership in the name of Smt. Shakuntala Devi and Smt.Radha Dubey. No steps were taken by the authorities to make the additions in their names nor any enquiry was conducted by the AO in the remand proceedings. Moreover, the law is fairly settled that the additions can only be made on the basis of some cogent and corroborative evidence and cannot be made on the basis of mere assumptions and surmises by taking recourse to Section 132(4A) of the Act. In the result, the ground raised by the assessee is allowed. Addition for purchase of jewellery - HELD THAT - As already discussed in detail the status of the assessee while dealing with Ground No.1 and had decided the issue against the assessee by upholding the addition of ₹ 2,50,000/- on account of household expenses. In view of the above, the addition made by the AO towards purchase of jewellery is deleted as the same be subsumed in the addition confirmed by us regarding household expenses. This Ground of assessee is allowed.

Summary

Issues Involved:
1. Estimation of household expenses.
2. Sustenance of addition for loans raised from farmers.
3. Addition based on third-party statements.
4. Addition for unexplained investments based on seized documents.
5. Addition for unexplained income from money lending.
6. Addition for unexplained cash found during the search.
7. Addition for security deposit for toll bridge contract.
8. Addition for contract income earned by other persons.
9. Addition for household goods.
10. Addition based on annexure LP-1.
11. Addition for investments made by third parties.
12. Addition for purchase of jewelry.

Issue-wise Detailed Analysis:

1. Estimation of household expenses:
The assessee contended the addition of ?80,000/- sustained by the CIT(A) by estimating personal expenses at ?2,50,000/- against ?1,70,000/- shown by the assessee. The Tribunal found the CIT(A)'s estimation reasonable, considering the assessee's co-ownership of 300 bighas of land and involvement in money lending and contract business. Hence, this ground was dismissed.

2. Sustenance of addition for loans raised from farmers:
The assessee argued that the addition of ?4,50,000/- for loans raised from farmers, supported by affidavits, was illegal. The Tribunal noted that the CIT(A) had not admitted the affidavits as additional evidence due to non-compliance with Rule 46A. However, the Tribunal found that the AO did not bring any adverse material on record during remand proceedings. Thus, this ground was allowed.

3. Addition based on third-party statements:
The assessee contested the addition of ?2,00,000/- based on a third-party statement recorded at the back of the assessee. The Tribunal found that the AO did not provide the statement to the assessee nor allowed cross-examination. The Tribunal, following the Supreme Court's decision in Kishinchand Chellaram vs CIT, deleted the addition, allowing this ground.

4. Addition for unexplained investments based on seized documents:
The assessee challenged the addition of ?4,25,272/- based on annexure BK-15, arguing that the entries did not relate to the AY 2005-06. The Tribunal verified the records and found that the entries pertained to earlier years. Hence, this ground was allowed.

5. Addition for unexplained income from money lending:
The assessee disputed the addition of ?17,56,795/- for unexplained investment in money lending. The Tribunal found no dates against the entries, and the assessee failed to prove that the entries did not pertain to the year under consideration. Thus, this ground was dismissed.

6. Addition for unexplained cash found during the search:
The assessee claimed that the cash of ?8,62,125/- belonged to M/s Suresh Kumar Pandey and Brothers. The Tribunal rejected this plea, noting that the assessee was not a partner or owner of the said firm. Hence, this ground was dismissed.

7. Addition for security deposit for toll bridge contract:
The assessee argued that the addition of ?3,90,000/- for security deposit should be limited to his 1/6th share in the contract. The Tribunal, considering the overall circumstances, restricted the addition to ?1,90,000/-, granting relief of ?2 Lakhs. Thus, this ground was partly allowed.

8. Addition for contract income earned by other persons:
The assessee contended the addition of ?6,88,876/- for contract income earned by Tahir Ali and Mohd Idris. The Tribunal found that the authorities failed to prove that the entries pertained to the assessee. Thus, the ground was partly allowed, restricting the addition to ?1,90,000/-.

9. Addition for household goods:
The assessee contested the addition of ?1,15,000/- for household goods. The Tribunal, considering the assessee's status and means, found the addition justified and dismissed this ground.

10. Addition based on annexure LP-1:
The assessee challenged the addition of ?24,98,836/- based on annexure LP-1. The Tribunal deleted ?8,25,416/- as it pertained to earlier years and restricted the remaining addition to ?6,03,470/-, granting a relief of ?10 Lakhs. Thus, this ground was partly allowed.

11. Addition for investments made by third parties:
The assessee disputed the addition of ?50,000/- for investment by Shakuntla Devi and ?4,43,747/- by Smt. Radha Dubey. The Tribunal found no corroborative evidence to support these additions and allowed this ground.

12. Addition for purchase of jewelry:
The assessee contested the addition of ?74,400/- for jewelry purchase. The Tribunal, considering the assessee's status and previous addition for household expenses, deleted this addition. Thus, this ground was allowed.

Conclusion:
The appeal of the assessee was partly allowed, with several additions deleted or reduced based on the Tribunal's findings.