2022 (6) TMI 235 - AT - Income Tax

Addition u/s 68 - cash deposited in the bank is unexplained - HELD THAT - Perusal of the gift deed shows that the donor viz. Shri Narendra Maganbhai Pancholi has sold piece of agriculture land from 28.3.2008 to 30.3.2008 and one agriculture land on 26.7.1999. The donor claimed that this amount has been invested in private bank, shroff and money lenders etc. and this amount till August 2011 accumulated around Rs.18.00 lakhs; out of this Rs.18.00 lakhs, the donor gifted to the assessee during August, 2011 to March 2012 a sum of Rs.17,27,000/-. The assessee has not proved or explained before the lower authorities the instalments of amount of gift given by the donor and mode of payment. When the AO has requested to produce the donor as well as witnesses, the assessee failed to do so. However, it is noticed that the gift deed executed in the non-judicial stamp paper is dated as 17.11.2011, however, the same was executed on 31.3.2012, i.e. almost after 100 days CIT(A) has held that sale of agriculture land by the donor pertained to the financial year 1999- 2000 and 2008-09, but the assessee claimed that the copies were given during the financial year 2011-12, and there is a clear cut time gap of more than thousand days from the date of sale and the date of alleged donation made to the assessee. The same has not been explained by the assessee before the lower authorities. Further, it is seen from the gift deed that the donor stated to have deposited the sale proceeds in private banks, but no bank passbook or income from agriculture activity has been produced before the lower authorities. The assessee has also failed to produce the donor or the witnesses before the authorities. Even before us, except gift deed, the other three documents viz. 7/12 extracts, registered sale deed and latest 7/12 of the land record, which are in Gujarat language are only produced and English translation was not furnished. Hence, based on these unexplained documents we are not in a position to adjudicate the issue on hand. The ld.DR also repeated the same arguments as were made before the lower authorities, and no new documents could be furnished to establish genuineness of the gift received from Shri Narendra Maganbhai Pancholi. In the absence of the same, ground raised by the assessee for deletion of impugned addition is hereby rejected. Similar is the issue relating to addition of rental income as in support of the claim of the addition made by the AO, the assessee has not produced any details before us, hence, this ground is also rejected. Initiation of penalty proceedings under section 271(1)(c) of the Act, which is consequential in nature - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 17,27,000/- under Section 68 of the Income Tax Act, 1961.
2. Addition of Rs. 11,830/- on account of excess rent received.
3. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of Rs. 17,27,000/- under Section 68:

The assessee, an architect and partner in a partnership firm, filed a return declaring total income of Rs. 2,20,390/- along with agricultural income of Rs. 35,690/-. During scrutiny assessment, an addition of Rs. 17,27,000/- was made under Section 68 of the Income Tax Act, 1961, treating the amount as unexplained cash credit. The assessee claimed the amount was a gift from his uncle, derived from the sale of agricultural land. However, the gift deed was unregistered, not notarized, and the donor or witnesses could not be produced. The Commissioner of Income Tax (Appeals) [CIT(A)] rectified the technical defect and sustained the addition under Section 69A as unexplained money. The assessee's arguments regarding the validity of the gift deed, the source of cash from the sale of agricultural land, and the time gap between the sale and the gift were not accepted. The Tribunal upheld the CIT(A)'s decision, noting the lack of evidence to support the genuineness of the gift and the failure to produce the donor or witnesses.

2. Addition of Rs. 11,830/- on Account of Excess Rent Received:

The assessee received total rent of Rs. 1,56,000/- from M/s. Swadhar Finser P. Ltd. but declared only Rs. 1,39,100/- in the computation of income. The Assessing Officer (AO) added the balance rent amount of Rs. 11,830/- after making a standard deduction. The Tribunal upheld this addition as the assessee failed to produce any details or evidence to contest the AO's findings.

3. Initiation of Penalty Proceedings under Section 271(1)(c):

The AO initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act for the above disallowances. The Tribunal noted that this issue was consequential in nature and upheld the initiation of penalty proceedings, rejecting the assessee's appeal on this ground.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, upholding the additions made by the AO and sustained by the CIT(A). The Tribunal emphasized the lack of evidence and failure to produce necessary documents and witnesses to substantiate the claims made by the assessee. The order was pronounced in the Court on 3rd June, 2022, at Ahmedabad.