2021 (2) TMI 783 - AT - Income Tax

Unexplained income/ unexplained expenditure - HELD THAT - There is no corroborative / demonstrative evidence to justify the additions so made. When the AO came to know that the bank account at Vijaywada belongs to Lingaya Society then the AO should have made atleast some necessary enquiries from the said society but we find that neither the AO nor the first appellate authority has done any such exercise. We further find that the AO did not accept the contention of the assessee that the said document is a dumb document. According to the AO a document can be considered as dumb document only when it has no reference as to any person or identity or to any date or to any amount. We find that no dates have been mentioned in the impugned entries which are basis of the additions. We fail to understand when no dates have been mentioned then how the AO came to the conclusion that the document pertains to A.Y. 2008-09. Further the entries relating to LJT which according to the AO pertained to A.Y. 2008-09 have to be demolished on the fact that LJT came into existence on 10.07.2009 which falls in F.Y. 2009-10 relating to A.Y. 2010-11. The additions made by the AO are without any corroborative evidence brought on record, therefore, we have no hesitation in deleting the addition . Credit in bank entries - HELD THAT - Appellant introduced his own accounted cash in the form of loan to show his accounted capital, what benefit a person would drive if the same loan is repaid immediately thereby reducing the accounted capital. Considering the fact in totality we do not find any merit in this addition of ₹ 4 lacs and the same is direct to be deleted. Exhibit 213 of the paper book is the confirmation of M/s. Gyan Kund Trust Educate and it can be seen that on 01.04.2007 there was an opening balance of ₹ 15 lacs out of which on 13.10.2007 ₹ 2.50 lacs was repaid by cheque No. 770251. Exhibit 215 show that on 08.12.2006 loan of ₹ 5 lacs was given by cheque No. 175852 and on 0802.2007 loan of ₹ 10 lacs was given by cheque No.917483. Since the entry of ₹ 2.50 lacs is nothing but the repayment of loan given by the assessee in earlier assessment years no addition need to be made on this account. We accordingly direct the AO to delete the addition. Validity of the reopening of the assessment - HELD THAT - No action shall be taken under this section after the expiry of four years unless any income has escaped by reason of the failure on the part of the assessee to make a return u/s. 139 or to disclose fully and truly or on material facts necessary for his assessment. As mentioned elsewhere the assessee has filed the return of income u/s. 139 (1) of the Act which was duly assessed u/s. 143 (3) of the Act. All the queries raised by the AO were duly replied by the assessee with supporting documentary evidences. Merely because some unrelated party in her statement has stated that the assessee and his wife have paid consideration over and above the transaction value would not justify the reopening and the impugned addition, firstly because the said statement was recorded behind the back of the assessee for which no opportunity of cross examination was given and secondly, there is no evidence brought on record to show that the actual sale consideration was much higher than that mentioned in the sale deed. In fact the stamp valuation authorities have accepted the stamp duty on the transaction value of 1.05 crores and, therefore, no adverse inference should have been drawn by the AO. We accordingly quash the notice issued u/s 148 of the Act thereby quashing the assessment order framed u/s. 143 (3) r.w.s. 147 of the Act.

Summary

Issues Involved:
1. Validity of the reopening of the assessment.
2. Addition of ?2.50 crores based on impounded documents.
3. Addition of ?976,340 based on unexplained credit entries.
4. Addition of ?3.15 crores towards the purchase cost of a farmhouse.

Issue-wise Detailed Analysis:

1. Validity of the Reopening of the Assessment:

The counsel for the assessee did not press the grounds challenging the validity of the reopening of the assessment for A.Y. 2008-09, leading to the dismissal of ground Nos. 1 and 2. For A.Y. 2009-10, the reopening was based on information from the DDIT (Investigation) regarding the purchase of a farmhouse. The assessee argued that the notice was issued after four years without proper application of mind and based on a third-party statement without the opportunity for cross-examination. The Tribunal found that the reopening was bad in law as the assessee had fully disclosed all material facts during the original assessment, and there was no corroborative evidence to support the claim of additional consideration paid. Consequently, the notice issued u/s 148 and the subsequent assessment order were quashed.

2. Addition of ?2.50 Crores Based on Impounded Documents:

The AO made an addition of ?2.50 crores based on a document found during a survey, which the assessee claimed was a "dumb document." The Tribunal noted that the document did not have dates, and there was no evidence of the assessee or Lingaya Society purchasing land in Vijaywada. Additionally, the Lingaya Jan Kalyan Trust (LJT) did not exist during the relevant assessment year. The Tribunal concluded that the addition was based on presumptions without corroborative evidence, leading to the deletion of the ?2.50 crores addition.

3. Addition of ?976,340 Based on Unexplained Credit Entries:

The AO noticed credit entries of ?3.99 lakhs, ?2.50 lakhs, and ?177,340 in the assessee's bank statement, which were explained as loans from various sources. The Tribunal found that the AO and CIT(A) did not properly examine the documentary evidence provided by the assessee, including confirmations from the lenders. The Tribunal directed the deletion of the additions of ?4 lakhs and ?2.50 lakhs, as they were satisfactorily explained. However, the assessee did not press the addition of ?177,340, which was confirmed.

4. Addition of ?3.15 Crores Towards the Purchase Cost of a Farmhouse:

The AO reopened the assessment based on a statement from the seller claiming that ?3.15 crores was paid, including ?2.10 crores in cash. The Tribunal noted that the assessee had disclosed the purchase of the property for ?1.05 crores during the original assessment, and the stamp duty authorities accepted this value. The Tribunal held that the reopening was unjustified as the statement was recorded behind the assessee's back without cross-examination, and there was no evidence of additional consideration. The assessment order was quashed.

Conclusion:

The appeals for A.Y. 2008-09 resulted in partial relief for the assessee, with the deletion of ?2.50 crores and ?6.50 lakhs in additions, while confirming ?177,340. For A.Y. 2009-10, the Tribunal quashed the reopening of the assessment and the subsequent additions, providing complete relief to the assessee.