2023 (8) TMI 1180 - AT - Income Tax

Assessment u/s 153A - Undisclosed investment - HELD THAT - It is admitted fact by the assessee that it has paid only sum of Rs. 5 Lacs to the sellers and therefore, the investment, to that extent, could be considered as undisclosed investment by the assessee. Accordingly, the impugned addition stand restricted to the extent of Rs. 5 Lacs. We order so. The corresponding grounds stand partly allowed. Addition of agricultural income - We find that the assessee has been searched on 21.02.2019. It is undisputed fact that on the date of search, no assessment proceedings were pending against the assessee for the year under consideration. Therefore, this is a year of unabated assessment. We also find that the impugned addition is not based on any incriminating material as found by the department during the curse of search proceedings. In such a case, no addition could have been made by revenue in terms of the recent decision of DCIT vs. U.K. Paints (Overseas) Ltd 2023 (5) TMI 373 - SC ORDER In this decision, Hon ble Court followed its earlier decision rendered in Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT and held that where no incriminating material was found in case of any of assessee either from assessee or from third party, High Court rightly set aside assessment order passed under section 153C. In the present case, the facts are similar. There is nothing on record which would show that any incriminating material was found during search operation which would show that the agricultural income belonged to the assessee instead of HUF. Therefore, we would hold that the aforesaid agricultural income is not to be considered in the hands of the assessee. The corresponding grounds raised by the assessee stand allowed. The addition on account of gift to wife has already been deleted in the impugned order. Assessee appeal partly allowed.

Summary

Issues Involved:
1. Quantum addition of Rs. 200 Lacs as unexplained investment.
2. Agricultural income of Rs. 10 Lacs considered in the hands of the assessee.
3. Disallowance under Section 37(1) for Rs. 8.16 Lacs.

Summary:

Quantum Addition of Rs. 200 Lacs:
The assessee challenged the addition of Rs. 200 Lacs, arguing that the terms of the agreement were not acted upon. The Ld. AO based the addition on incriminating material found during a search operation, which included a sale agreement indicating an advance payment of Rs. 200 Lacs for a property purchase. The assessee contended that only Rs. 5 Lacs was paid as an advance and the agreement was prepared for filing an FIR due to fraudulent documents. The Ld. AO, however, considered the entire Rs. 200 Lacs as unexplained investment. The ITAT concluded that there was no concrete evidence to support the payment of Rs. 200 Lacs and restricted the addition to Rs. 5 Lacs, acknowledging it as an undisclosed investment.

Agricultural Income:
The assessee claimed agricultural income of Rs. 10 Lacs in the hands of an HUF entity. The Ld. AO rejected this, treating the income as unaccounted income under Section 68, arguing that there was no HUF. The ITAT found that no incriminating material was found during the search to support the addition and held that the agricultural income should not be considered in the hands of the assessee, following the precedent set by the Hon'ble Apex Court.

Disallowance under Section 37(1):
The assessee claimed a gift to his wife of a car worth Rs. 8.16 Lacs. The Ld. AO disallowed this as an expenditure under Section 37(1). The Ld. CIT(A) deleted this addition, concurring with the assessee's submission that the income was offered on a presumptive basis under Section 44AE, and no Profit & Loss account claimed this amount as an expenditure. The ITAT upheld this deletion.

Conclusion:
The ITAT partly allowed the appeal, restricting the addition for unexplained investment to Rs. 5 Lacs, deleting the addition of agricultural income, and upholding the deletion of the gift disallowance. The order was pronounced on 23rd August, 2023.