2020 (4) TMI 579 - AT - Income Tax

Addition u/s 69A - amount in question was seized by the Director of Enforcement, FEMA from the residence of the assessee at Bhubaneswar - assessee explained that the assessee sold his house at Morar, Gwalior and advance was received on sale of his house - HELD THAT - authorities below should not have asked the purchaser to prove source of the source. The purchaser also in his statement explained the reasons for giving the advance in cash to the assessee because he was not maintaining bank account for the last ten years. The assessee has only the source of income from capital gain and income from other sources being interest. Therefore, the assessee was not doing any business activity during the year under consideration. The assessee has disclosed to the Revenue department about the advance received against property to be sold and such particulars were disclosed in the return of income as well. Therefore, the facts of the case clearly prove that the AO should not have insisted the assessee to prove source of the purchaser for purchase of the property in question. It is not the case of the revenue authorities that the assessee in this case has not offered any explanation so as to attract the provisions of Section 69A - Referring to observations made by the coordinate bench of the Tribunal in case of the purchaser Shri Raghav Garg 2013 (8) TMI 671 - ITAT AGRA from whom the assessee has taken advance on account of purchase of house property of the assessee in accordance with the agreement to sale, we are of the considered view that since the assessee has duly explained the source of complete cash found during the search by the FEMA and the investigation has also been closed in the case of the assessee by FEMA as reproduced hereinabove, the addition made by the AO and sustained by the Ld. CIT(A) is bad in law and liable to be deleted. Therefore, we delete the addition in dispute and allow the ground No.1 raised by the assessee. Disallowance of reimbursement of expenses - HELD THAT - Before us ld. AR submitted that the assessee is having the supporting documents as placed in the paper book, therefore, prayed for one more opportunity to substantiate its claim before the AO. In view of the above facts and circumstances of the case, we restore this issue to the file of AO to decide the issue after examining and verifying those documents to be produced by the assessee to substantiate his claim. Non-taxability of amounts received as directors fees - HELD THAT - Remit this issue to the file of AO to decide the disputed issue after examining and verifying the documents available with the assessee in form of paper book. Non-credit of tax payment - HELD THAT - AR before us submitted that the revenue authorities have not given credit - we direct the AO to verify the records for payment of tax. If it is found that the assessee has already paid the tax, then the AO will give due credit accordingly. Thus, this ground of appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the CIT(A) order.
2. Legality of the assessment order dated 31.12.2008.
3. Principles of natural justice and arbitrary actions in the assessment order.
4. Addition of ?82,14,500 under Section 69A of the Income Tax Act.
5. Disallowance of ?5,32,562 as reimbursement of expenses.
6. Non-taxability of Director's fees under the India-UK DTAA.
7. Levy of interest under Sections 234B and 234C.
8. Non-credit of tax payment of ?3,74,099.

Detailed Analysis:

1. Validity of the CIT(A) Order:
The appellant argued that the CIT(A)'s order dated 22.10.2010 was against principles of natural justice, arbitrary, and bad in law. However, the tribunal did not find merit in this argument as the appellant did not pursue these grounds during the hearing.

2. Legality of the Assessment Order:
The appellant contended that the assessment order dated 31.12.2008 was erroneous and should have been annulled by the CIT(A). This ground was also not argued by the appellant and was dismissed by the tribunal.

3. Principles of Natural Justice and Arbitrary Actions:
The appellant claimed that the assessment order was arbitrary, based on presumptions, and lacked material evidence. This ground was not pursued during the hearing and was dismissed.

4. Addition of ?82,14,500 under Section 69A:
The assessee argued that the amount seized by FEMA was part of an advance received from the sale of an inherited property. The tribunal noted that the buyer, Raghav Garg, confirmed the transaction and the advance payment. The tribunal found that the source of the money was satisfactorily explained and that the FEMA had closed its investigation. The tribunal deleted the addition made by the AO and sustained by the CIT(A), concluding that the addition was bad in law.

5. Disallowance of ?5,32,562 as Reimbursement of Expenses:
The assessee claimed that the amount received from Magnesium International, Australia, was a reimbursement of expenses and not taxable income. The tribunal noted that the assessee failed to substantiate this claim with supporting documents during the assessment proceedings. The tribunal remitted the issue back to the AO for fresh examination and directed the assessee to provide the necessary documents.

6. Non-taxability of Director's Fees under the India-UK DTAA:
The assessee argued that the Director's fees received from Vedanta Resources Plc., UK, were not taxable in India under Article 17 of the India-UK DTAA. The tribunal found that the issue required further examination and remitted it back to the AO for fresh adjudication, directing the AO to consider the relevant documents and case laws.

7. Levy of Interest under Sections 234B and 234C:
The tribunal noted that this ground was consequential in nature and directed the AO to act accordingly.

8. Non-credit of Tax Payment of ?3,74,099:
The assessee claimed that the revenue authorities had not given credit for a tax payment of ?3,74,099. The tribunal directed the AO to verify the records and give due credit if the payment was found to have been made.

Conclusion:
The tribunal partly allowed the appeal for statistical purposes, remitting several issues back to the AO for fresh examination and verification. The tribunal deleted the addition of ?82,14,500 under Section 69A, finding that the source of the money was satisfactorily explained.