2023 (5) TMI 308 - AT - Income Tax

Unexplained cash credit u/s 68 - disallowance of brokerage commission and treated the same as unaccounted cash credit - assessee failed to provide sufficient documentary evidence; name and address of the parties from whom brokerage commission income was received - HELD THAT - As decided in assessee's own case 2021 (4) TMI 801 - ITAT SURAT assessee has shown commission income in original return of income. We find convincing force in the submissions of assessee that the assessee has already filed Return of Income under section 139 of the Act before the date of initiation of assessment proceeding and much less after completion of investigation carried out by Investigation Wing of Revenue, it could not in any way be termed as unexplained income, the addition of unexplained income is purely guess work of assessing officer - no justification in treating the commission income as unexplained cash credit, accordingly appeal of the assessee is allowed. Considering the decision of Tribunal on similar treatment of commission income as unexplained cash credit, we respectfully following the decision of Tribunal allowed ground No.1 of the assessee Estimation of income of assessee - HELD THAT - We find that neither the assessee has shown his true source of income nor the assessing officer brought on record the evidence regarding source of income of assessee. The only evidence, on the basis of which the income of assessee is estimated in the school admission form. It is settled position under law that only real income accrued or earned by individual, can only be brought to tax. Considering the decision of Hon ble Supreme Court in Kishan Chand Chellaram 1980 (9) TMI 3 - SUPREME COURT and Andaman Timber 2015 (10) TMI 442 - SUPREME COURT there grounds of appeal is restored back to the file of assessing officer with the direction to grant opportunity to the assessee to explain the nature and relevance of school admission form and to lead any other evidence if so desired by the assessee to disprove the contents of such school admission form. It is made clear that as the copy of said school admission form is scanned by assessing officer in the assessment order the assessee shall not insist for supply of fresh copy thereof. Assessee ground allowed for statistical purpose.

Issues Involved:
1. Addition of Rs. 9,35,200/- treating brokerage income as unexplained cash credit under Section 68 of the Income Tax Act.
2. Addition of Rs. 48,00,000/- based on presumptions and assumptions of undisclosed income under Section 69A of the Income Tax Act.
3. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Addition of Rs. 9,35,200/- treating brokerage income as unexplained cash credit under Section 68 of the Income Tax Act:

The assessee filed his return of income for AY 2013-14 declaring an amount of Rs. 2,64,730/-. The Assessing Officer (AO) made an addition of Rs. 9,35,200/- on account of disallowance of brokerage commission, treating it as unaccounted cash credit due to insufficient documentary evidence. The AO noted that the assessee failed to provide the names and addresses of the parties from whom the brokerage commission was received.

The CIT(A) upheld the AO's decision, stating that the assessee failed to disclose a single party from whom the diamond was claimed, purchased, or sold, and no record of any consigner sale was found during the search.

Upon appeal, the Tribunal considered the assessee's submission that the issue was covered by the Tribunal's decision in the assessee's own case for AYs 2011-12 and 2012-13. The Tribunal noted that the AO had not doubted the various expenses claimed against the commission income and that no incriminating material for non-genuine commission income was seized during the search. Following the principle of consistency, the Tribunal allowed the ground of appeal, reversing the treatment of commission income as unexplained cash credit.

2. Addition of Rs. 48,00,000/- based on presumptions and assumptions of undisclosed income under Section 69A of the Income Tax Act:

The AO made an addition of Rs. 38,64,400/- on account of unexplained money under Section 69A, based on the information gathered from G D Goenka School that the assessee had paid Rs. 7,89,800/- in cash for his children's education and had declared a monthly income of Rs. 4 lakhs in the school admission form. The AO presumed that the assessee had an annual income of Rs. 48 lakhs, deducting the previously added Rs. 9,35,200/-.

The CIT(A) upheld the addition, noting that the assessee maintained a high standard of living and had admitted his children to a costly school. The CIT(A) also observed that three luxurious cars were found at the assessee's residence.

The Tribunal found that the AO solely relied on the school admission form and that no tangible material or evidence was found during the search to prove that the assessee had unaccounted income. The Tribunal emphasized that only real income accrued or earned by an individual can be taxed. The Tribunal restored the grounds of appeal to the AO, directing to grant the assessee an opportunity to explain the nature and relevance of the school admission form and to lead any other evidence to disprove its contents. The AO was also given liberty to investigate further and pass a fresh order in accordance with the law.

3. Violation of principles of natural justice:

The assessee argued that the AO's action of making additions based on information gathered at the back of the assessee without providing an opportunity to controvert the same was a violation of the principles of natural justice. The Tribunal acknowledged this argument and directed the AO to grant the assessee an opportunity to explain and provide evidence, ensuring adherence to the principles of natural justice.

Conclusion:

The appeal was partly allowed. The Tribunal allowed the ground related to the addition of Rs. 9,35,200/- treating brokerage income as unexplained cash credit, following the decision in the assessee's own case for previous years. The Tribunal restored the grounds related to the addition of Rs. 48,00,000/- to the AO for fresh consideration, directing to grant the assessee an opportunity to explain and provide evidence. The Tribunal emphasized adherence to the principles of natural justice throughout the proceedings.

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