2022 (11) TMI 909 - AT - Income Tax

Unexplained Cash Credits - Addition u/s 68 - HELD THAT - In the instant case, although the amounts have been received through banking channel, however the assessee did not produce the above three persons before the AO during the course of assessment proceedings, which is one of the reasons for making the addition by the AO apart from not proving the creditworthiness to his satisfaction. It is the submission of the ld.counsel for the assessee that given an opportunity the assessee is in a position to produce the above three persons before the AO for his examination and prove their creditworthiness. We deem it proper to restore the issue to the file of the AO with a direction to grant one more opportunity to the assessee to substantiate his case by producing three parties for his examination and file necessary evidence to prove their creditworthiness. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes. STCG on sale of land - agreed price as per document found at the time of search - assessee denied to have received any money over and above what has been mentioned in the sale deed - HELD THAT - We deem it proper to restore the issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate his case by producing Mr.C.Veerabhadra Reddy for his examination. Further, the assessee is also directed to produce necessary evidence to show that the proposed plan was drifted away from the land in question for which the price has come down. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground raised by the assessee is accordingly allowed for statistical purposes.

Summary

Issues Involved:
1. Unexplained Cash Credits: Rs. 8,49,600/-
2. Short Term Capital Gain: Rs. 1,01,05,000/-
3. Additional Grounds related to Short Term Capital Gain: Rs. 23,66,606/-

Issue-Wise Detailed Analysis:

1. Unexplained Cash Credits: Rs. 8,49,600/-

The assessee challenged the addition of Rs. 8,49,600/- made by the AO, who treated the amount as unexplained cash credits under Section 68 of the Income Tax Act. The AO noted that the assessee had shown unsecured loans from four creditors amounting to Rs. 63,49,600/-. The assessee failed to produce evidence of creditworthiness for three creditors and did not produce any of them for examination. The CIT(A) sustained the addition for Rs. 8,49,600/- related to three creditors (Sri T. Subba Rao, Sri C.V.K. Murthy, and Sri Y.H. Gangulaiah) while deleting Rs. 55,00,000/- related to M/s Sree Minerals. The Tribunal, considering the arguments, remanded the issue to the AO for a fresh examination, directing the assessee to produce the creditors and substantiate their creditworthiness.

2. Short Term Capital Gain: Rs. 1,01,05,000/-

The AO added Rs. 1,01,05,000/- as short-term capital gain based on an agreement found during a search operation, which indicated a sale consideration of Rs. 1,08,08,000/- for a property. The assessee claimed to have received only Rs. 42,24,000/-. The CIT(A) partly sustained the addition, reducing it to Rs. 35,49,000/-. The Tribunal noted the assessee's failure to produce the buyer and substantiate the claim of distress sale due to a change in the master plan. The issue was remanded to the AO for fresh examination, directing the assessee to produce the buyer and evidence of the alleged price drop.

3. Additional Grounds related to Short Term Capital Gain: Rs. 23,66,606/-

The assessee raised additional grounds, arguing that the AO's computation of short-term capital gains included amounts already declared, leading to double taxation. The CIT(A) acknowledged the mistake and directed the AO to rectify it. The Tribunal remanded the issue to the AO to verify the claim of double addition and adjudicate afresh.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, directing the AO to re-examine the issues related to unexplained cash credits and short-term capital gains, ensuring the assessee is given an opportunity to substantiate their claims. The Tribunal emphasized the need for the assessee to produce relevant evidence and witnesses to support their case.