2023 (12) TMI 327 - AT - Income Tax

Undisclosed loans and advances - AO formed a belief that the assessee has given loans and advances outside the books of account - Basis the notings in this seized ledger AO made addition - HELD THAT - It is true that presumption u/s 132(4A) /292C of the Act is that whatever is found and seized during the course of search proceedings has to be accepted as such but the contention of the ld. counsel for the assessee that if in the seized document the amount is written as Loan , then it should be accepted as loan and cannot be examined u/s 68 of the Act and cannot be accepted because it would make the entire scheme of Act redundant. Moreover, in none of the cases referred to and relied upon by assessee have given any findings on the non applicability of section 68 on the seized document. The finding is in respect of presumption u/s 132(4A)/292C of the Act and there is no denial of such presumption but the issue under consideration is whether provisions of section 68 can be made applicable on such mentioning of Loan in the seized document. Then, in our considered opinion, even if the mention is of loan then also the assessee has to prove that it is a loan and, therefore, provisions of section 68 squarely apply on such notings and the onus is on the assessee to establish the identity, capacity of the lender and genuineness of the transaction as is applicable in normal assessment proceedings. Since the assessee has grossly failed in all the three counts, we decline to interfere with the findings of the ld. CIT(A). Accordingly, Ground No. 4 of the assessee s appeal and Ground No. 1 of Revenue s appeal are dismissed. Addition on account of undisclosed interest - We direct the Assessing Officer to allow expenditure relating to payment of interest and bad debts and allocate balance interest income, if any, in the ratio 60 40 as done in earlier years between the assessee and his brother Shri Vinod Gupta. Accordingly, Ground No. 5 of the assessee s appeal is allowed for statistical purposes. Investment in jewellery - addition are that on the basis of seized documents - CIT(A) deleted addition - HELD THAT - It is not in dispute that it is customary in affluent families to get jewellery on approval basis. All that we have to see is how much of the jewelry was purchased and whether the assessee has successfully demonstrated the source of investment. Thus only jewellery of Rs. 67 lakhs was purchased with necessary entries in Day Book clearly explaining the source of investment. On these facts, we do not find any reason to interfere with the findings of the ld. CIT(A). Undisclosed investment - CIT(A) deleted addition - HELD THAT - The undisputed fact is that the impugned property was owned by Standard Enterprises which is a partnership firm having two partners, namely, Smt Madhu Gupta and Smt. Veena Gupta. It is also an undisputed fact that sale deed was executed on 06.07.2007 falling in F.Y. 2007-08 pertaining to A.Y 2008-09. On these undisputed facts, the ld. CIT(A) has rightly deleted the impugned addition, which calls for no interference. Accordingly, Ground is dismissed. Undisclosed share purchases - blank share transfer deed found during the search - HELD THAT - We find that the undisputed fact is that as on 31.03.2009, Shri V.K. Bansal of Sora Marketing Pvt Ltd was still the registered share holder of the impugned shares which means that the share transfer deal never materialized and the impugned transaction never took place. We, therefore, decline to interfere with the findings of the ld. CIT(A). Interest u/s 234A for the period upto which the assessee was not provided copy of seized material - HELD THAT - An identical issue was considered by the coordinate bench in assessee s own case for assessment year 2006-07 and 2007-08 interest u/s 234A not to charged for the period upto which the assessee was not provided copy of the seized material and in our humble understanding of law, this conclusion of the Commissioner of Income Tax (Appeals) is in accordance with the provisions of the Act and, therefore, we are unable to see any valid reason to interfere with the same and hence, we uphold the same. Income from trading commission - assessee explained that this entry was made forcibly by the search party on 01.08.2009 at 3.30 AM and contended that nothing emerges out of the said sheet as to from which trading commission of Rs. 1.02 crores has been earned by the assessee - CIT(A) deleted addition - HELD THAT - The undisputed fact is that the entire addition is based upon the confession made by the assessee at the time of search. Other than this, there is no evidence brought on record to suggest that the assessee was doing some trading business from which he earned commission. It is also not in dispute that no excess cash or jewellery was found where this alleged unaccounted income must have been invested. Since the addition is not backed by any supporting evidences, the ld. CIT(A) has rightly deleted the said addition which calls for no interference.

Summary

Issues Involved:

1. Validity of assessment notices.
2. Allocation of income among family members.
3. Addition on account of undisclosed loans and advances.
4. Addition on account of undisclosed interest income.
5. Addition on account of investment in jewelry.
6. Addition on account of undisclosed investment.
7. Charging of interest under section 234A.

Summary:

1. Validity of Assessment Notices:
The assessee contended that the assessment notices issued were invalid. However, the Tribunal upheld the validity of the assessment based on the first notice, treating the issuance of the second notice as a clerical mistake covered under section 292B of the Act. The Tribunal found no defect in the first notice and dismissed the legal ground of the assessee.

2. Allocation of Income Among Family Members:
The Tribunal agreed with the Commissioner of Income Tax (Appeals) [CIT(A)] that the income arising from the assets could not be exclusively attributed to the deceased Shri Suraj Bhan Gupta. The income was allocated between Shri S.K. Gupta and Shri V.K. Gupta in the ratio of 60:40, as they were the key players after the death of Shri Suraj Bhan Gupta. The Tribunal dismissed the assessee's contention that the entire income should be assessed in the hands of late Shri Suraj Bhan Gupta.

3. Addition on Account of Undisclosed Loans and Advances:
The Assessing Officer (AO) made an addition of Rs. 4,13,70,000/- for loans and advances given outside the books of accounts. The CIT(A) allowed the benefit of rotation of loans and advances from earlier years but upheld the addition of Rs. 85 lakhs for loans received by the assessee, which could not be substantiated. The Tribunal upheld the findings of the CIT(A) and dismissed the assessee's appeal on this ground.

4. Addition on Account of Undisclosed Interest Income:
The AO added Rs. 6,14,57,988/- as undisclosed interest income. The CIT(A) deleted the addition of Rs. 4,08,36,333/- based on the Tribunal's findings in earlier years, which allowed the benefit of rotation of loans and advances. The CIT(A) also allowed the deduction of interest payments and bad debts. The Tribunal upheld the CIT(A)'s decision and directed the AO to allocate the balance interest income in the ratio of 60:40 between the assessee and his brother.

5. Addition on Account of Investment in Jewelry:
The AO made an addition of Rs. 1,07,11,921/- for investment in jewelry. The CIT(A) found that the jewelry purchased was only to the tune of Rs. 67 lakhs, which was duly reflected in the Day Book. The Tribunal agreed with the CIT(A) that the source of investment was explained and dismissed the Revenue's appeal on this ground.

6. Addition on Account of Undisclosed Investment:
The AO added Rs. 1,79,91,000/- for undisclosed investment based on seized documents. The CIT(A) found that the property belonged to M/s Standard Enterprises, a partnership firm, and the sale deed was executed in A.Y 2008-09. The Tribunal upheld the CIT(A)'s decision, finding no factual error in the findings.

7. Charging of Interest under Section 234A:
The CIT(A) directed that interest under section 234A should not be charged for the period up to which the assessee was not provided a copy of the seized material. The Tribunal upheld this decision, following the precedent set by the Hon'ble Supreme Court in the case of Anum M.H. Ghaswala vs. CIT.

Conclusion:
The appeals of the assessees were partly allowed for statistical purposes, while the appeals of the Revenue were dismissed. The Tribunal upheld the CIT(A)'s findings on various additions and the allocation of income among family members, and directed the AO to recompute the interest income and allow deductions for interest payments and bad debts.