2022 (7) TMI 1154 - AT - Income Tax

Addition on account of past savings of the assessee - assessee has submitted that the assessee is in legal practice as an Advocate since 1976-77 and also having a substantial income from agricultural operations. - AO has estimated the past savings at Rs. 6,00,000/- instead of the claim of the assessee at Rs. 8,03,900/- - HELD THAT - AO has accepted that the assessee is in the profession of law since last so many years and also has an agricultural income and therefore, it cannot be denied that he is having no savings. Assessing Officer then observed that in the absence of any credible evidence, the past savings was accepted at Rs. 6,00,000/-. It is pertinent to note that the AO has not given any basis for acceptance of past savings at Rs. 6,00,000/- when the assessee in in the legal profession for last more than 40 years as well as having the agricultural land holding and agricultural income. Therefore, the estimation of the AO without any basis at Rs. 6,00,000/- as against the claim of Rs. 9,03,900/- is arbitrary and unjustified. Even otherwise the savings of Rs. 8,00,000/- in the legal profession of more than 40 years as well as the proof of agricultural land holding of the assessee is not an excessive claim and therefore, in the absence of any contrary material or fact brought by the Assessing Officer, the denial of this claim of past savings and restricting the same to Rs. 6,00,000/- as against Rs. 8,03,900/- is not justified Thus ignoring the facts and circumstances of legal practice of the assessee for such a long period as well as evidence produced for agricultural land holding, the additions sustained by the CIT(A) on the ground that no evidence could be furnished, is not justified. Accordingly, the addition made by the Assessing Officer and confirmed by the CIT(A) is deleted. Addition denying the claim of loan taken from the relatives as source of deposits in the bank account of the son - HELD THAT - As in the facts and circumstances of the case as well as the settled proposition of law, the addition sustained by the CIT(A) ignoring the evidence produced by the assessee to prove the identity, creditworthiness of the creditors and genuineness of the transaction by furnishing their identity proof, their source of income and confirmation is not justified and highly arbitrary. All these evidence produced by the assessee except the confirmation were independent evidences and cannot be fabricated or manufactured and consequently, the same cannot be doubted on the ground of afterthought. Accordingly, the impugned orders of the CIT(A) on this issue is set aside and the addition made on this account is deleted. Appeal of assessee allowed.

Issues Involved:
1. Non-speaking order by CIT(A) and violation of principles of natural justice.
2. Acceptance of past savings and treatment of unexplained/undisclosed income.
3. Treatment of loans from relatives as unexplained income.
4. Adequacy of time allowed for compliance with notices under section 133(6).
5. Admission and evaluation of additional evidence during appellate proceedings.

Detailed Analysis:

1. Non-speaking order by CIT(A) and violation of principles of natural justice:
The assessee contended that the order of the CIT(A) was erroneous as it did not state points for determination, the decision thereon, and the reason for the decision, violating the principles of natural justice. The Tribunal noted that the CIT(A) summarily confirmed the additions made by the Assessing Officer (AO) without providing detailed reasoning or addressing the evidence and arguments presented by the assessee.

2. Acceptance of past savings and treatment of unexplained/undisclosed income:
The assessee claimed past savings of Rs. 8,03,900 from professional and agricultural income. The AO accepted past savings but estimated them at Rs. 6,00,000, treating Rs. 2,03,900 as unexplained income. The Tribunal found that the AO's estimation was arbitrary and without basis, especially given the assessee's long-standing legal practice and agricultural land holdings. The Tribunal concluded that the AO's estimation lacked justification and deleted the addition of Rs. 2,03,900.

3. Treatment of loans from relatives as unexplained income:
The assessee explained a deposit of Rs. 7,00,000 as loans from six relatives, providing their details and supporting documents. The AO issued notices under section 133(6) but received no responses and thus treated the loans as unexplained income. The Tribunal noted that the AO issued the notices at the end of the limitation period, leaving insufficient time for compliance. The Tribunal emphasized that the AO failed to conduct a proper inquiry and that the CIT(A) did not adequately consider the evidence provided during the appeal. The Tribunal held that the rejection of the affidavits and other evidence without proper verification was unjustified and deleted the addition of Rs. 7,00,000.

4. Adequacy of time allowed for compliance with notices under section 133(6):
The Tribunal observed that the AO issued notices under section 133(6) with very short compliance deadlines, some of which were dispatched only a few days before the assessment order was passed. This left insufficient time for the loan creditors to respond. The Tribunal found this to be a violation of the principles of natural justice, as the assessee and creditors were not given a reasonable opportunity to provide the necessary information.

5. Admission and evaluation of additional evidence during appellate proceedings:
During the appellate proceedings, the assessee submitted additional evidence, including affidavits from the loan creditors. The CIT(A) called for a remand report, in which the AO objected to the admission of this evidence. The Tribunal criticized the CIT(A) for rejecting the additional evidence without proper verification and for not examining the loan creditors. The Tribunal highlighted that the affidavits and supporting documents provided by the assessee were credible and should have been considered. The Tribunal concluded that the CIT(A)'s approach was arbitrary and not in line with the principles of natural justice.

Conclusion:
The Tribunal allowed the appeal, deleting the additions made by the AO and confirmed by the CIT(A) regarding past savings and loans from relatives. The Tribunal emphasized the need for proper verification and consideration of evidence, adherence to natural justice principles, and providing adequate time for compliance with notices.

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