2024 (3) TMI 651 - AT - Income Tax

Unexplained loans - addition towards loans to M/s. Kangaroo Impex and interest thereon - HELD THAT - Fact remains that the assessee claims to have paid loan only through bank account and claimed that it has filed necessary evidences including source thereof. The loan given to the party in the books of accounts of the assessee shows different figure when compared to loan given and repayment thereof confirmed by M/s. Kangaroo Impex. If at all, loan is given only through bank account as claimed by the assessee, then the source thereof needs to be examined, in light of relevant bank statements pertains to the period of loan. Even if you go by the assessment order, there is no clear observation with regard to the mode of payment, whether it is cash loan or payment through bank. In fact, the loan details tabulated by the AO for both assessment years shows loan by way of cheque and by way of cash also. Since, facts are contradictory from both the sides, issue needs to be re-examined by the Assessing Officer, in light of averments of the assessee that loans given to M/s. Kangaroo Impex is through bank account only and source for said loan is explained. Additions towards interest income from loans given to M/s. Kangaroo Impex - Since, we set aside the issue of addition towards unexplained loan given to M/s. Kangaroo Impex, consequent addition towards interest on said loan also needs to go back to the file of the Assessing Officer. Thus, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to re-verify the additions made towards interest on loan. Addition towards investment in M/s. Mars Exports - It is very difficult to ascertain whether the appellant has discharged Rs. 11 crores to creditors of M/s. Mars Exports or not. The Assessing Officer, refers to three cash receipts dated 08.06.2010, 12.06.2010 18.06.2010, given by the creditors through five representatives as per mortgage deed and claimed that the appellant has settled Rs. 11 crores to creditors. The facts are contradictory. The assessee claims that he has settled outstanding creditors of Rs. 1,93,50,250/- and said payment has been cleared through bank, whereas, the Assessing Officer claims that the appellant has settled Rs. 11 crores to creditors by cash payments. Therefore, we are of the considered view that, this fact needs to be verified by the Assessing Officer with reference to seized documents. Repayment of outstanding dues to karur Vysya Bank - AO himself admitted in his assessment order that the settlement of dues to Karur Vysya Bank is not mentioned in the documents and the assessee has not clarified as to when and how the payment has been made to bank - there is no evidence with the Assessing Officer to allege that the assessee has repaid a sum of Rs. 5.5 crores to Karur Vysya Bank. AO has not made any attempt to gather information from the bank regarding settlement of loan to M/s. Mars Exports and how said loan has been repaid either in cash or through bank. Therefore, we are of the considered view that this issue also needs to be verified by the AO in light of above discussion. Unaccounted income - difference between estimated value of the property and sale consideration received by the assessee for sale of property - HELD THAT - Assuming for a moment, the value of the property is Rs. 20 crores and assessee has received a sum of Rs. 20 crores for sale of property, but fact remains that the Assessing Officer has made addition of Rs. 16.5 crores towards settlement of dues of M/s. Mars Exports, and this fact is correct then, additions partakes the character of cost of acquisition to the assessee. In case, the Assessing Officer sustained the additions towards settlement of outstanding dues of M/s. Mars Exports, then the same needs to be considered as cost of acquisition for the purpose of computation of cost of acquisition for sale of property. Therefore, for all these reasons, the issue needs to go back to the file of the Assessing Officer for fresh consideration. Thus, we set aside the issue to the file of the Assessing Officer and direct the Assessing Officer to re-examine the issue of additions of Rs. 16 crores for assessment year 2011-12, in light of our discussion given herein above and decide the issue in accordance with law. Additions towards unaccounted cash loans - Although, the assessee claims to have made payment for purchase of property, but it is evident from the receipts seized during the course of search, which clearly shows that these are loan transactions, but not for purchase of property. Further, the payments made for purchase of property are altogether different from reference to in seized material found during the course of search. From the above, it is abundantly clear that, the assessee could not explain source for cash loans given to Shri. C. Giridharan. Therefore, there is no error in the reasons given by the ld. CIT(A) to sustain additions made towards cash loans of Rs. 3.96 crores given to Shri. C. Giridharan and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee. Unaccounted cash loans to Shri C. Hariharan - Incriminating material found during the course of search reveals that the appellant had given cash loans to Shri C. Hariharan, but the assessee could not explain source for cash loans - HELD THAT - The assessee could not file any evidence to prove source for said loans. Even before us, except oral statement no evidence has been filed to justify source for cash loans to above party. Therefore, there is no error in the reasons given by the ld. CIT(A) to sustain additions made towards unaccounted cash loans to Shri C. Hariharan. Thus, we reject arguments of the assessee and uphold addition made towards unaccounted cash loan given to Shri C. Hariharan. Cash payment for purchase of property from Shri. C. R. Narayanasamy - The documents furnished by the assessee shows that payment by cheque only. The facts are not clear which needs further verification from the Assessing Officer to ascertain, is there any cash payment for purchase of property or not. Therefore, we are of the considered view that, this issue needs to go back to the file of the Assessing Officer for further verification. Thus, we set aside the addition made towards cash payment for purchase of property from Shri. C. R. Narayanasamy, to the file of the Assessing Officer and direct the Assessing Officer to reexamine the claim of the assessee in light of various evidences filed to justify source for payment for purchase of property, in light of incriminating material found during the course of search. The Assessing Officer is directed to reconsider the issue in accordance with law. Unaccounted cash loans to Shri. N. Venkataraman - Assessing Officer, observed that the RTGS number referred to by the assessee against payment of Rs. 40 lakhs to Shri. N. Venakataraman is incorrect, because said RTGS reference number is the payment made to Shri. T. Dhamodaran, but not to Shri. N. Venkataraman. Further, the documents found during the course of search clearly shows that, the assessee has paid loan against bank cheque, signed white blank sheets and surety of immovable property documents. The assessee could not explain source for said loan. Therefore, we are of the considered view that there is no error in the reasons given by the AO to make additions towards unaccounted cash loans to Shri. N. Venkataraman. CIT(A), after considering relevant facts has rightly made additions and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the assessee. Unaccounted cash loan to Shri. Ponnappan - Assessee has paid a sum of Rs. 15 lakhs in cash for the assessment year 2009-10, but could not explain source for said loan. Even before us, except making a general statement no evidence has been filed to explain source for said loans. Therefore, we are of the considered view that there is no error in the reasons given by the AO to make additions towards unaccounted cash loans to Shri. Ponnappan for Rs. 15 lakhs and thus, we uphold the findings of the ld. CIT(A) and reject grounds taken by the assessee. Unaccounted cash loan to Dr. S. Ramesh Kumar - The assessee could not file any evidence to negate the documents found during the course of search coupled with statement from Dr. S. Ramesh Kumar, except making an oral statement that loan given to Dr. S. Ramesh Kumar has been accounted in the books of accounts. Therefore, no error in the reasons given by the ld. CIT(A) to sustain addition towards unaccounted cash loan given to Dr. S. Ramesh Kumar and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject arguments of the assessee. Unaccounted cash loan to Shri. Thangavel - Although, the assessee claims that loans given to Shri. Thangavel has been accounted in the books of accounts, but the details filed by the assessee did not refute the evidence in the form of seized material found during the course of search which clearly shows unaccounted cash loan of Rs. 55 lakhs to Shri. Thangavel on behalf of Amala Jothi Co., Coimbatore. Therefore, assessee could not explain source of unaccounted cash loan given to Shri. Thangavel and thus, we uphold the addition made by the AO towards unaccounted cash loan to Shri. Thangavel. Unaccounted cash loans given to Shri. Paulraja - As admitted by the AO himself, out of Rs. 20 lakhs a sum of Rs. 15 lakhs has been paid through Kotak Mahindra Bank for which the AO did not verify the source. In respect of balance of Rs. 5 lakhs, said loan has been paid in cash and there is no dispute. The assessee could not explain source. Since, there is no clear finding with regard to the mode of payment of Rs. 15 lakhs and also the assessee claims that a sum of Rs. 15 lakhs is paid through bank account, in our considered view, the matter needs further examination. Therefore, we direct the AO to re-examine additions made towards unaccounted cash loan of Rs. 20 lakhs given to Shri. Paulraj, in light of various evidences filed by the assessee and decide the issue in accordance with law. Unaccounted cash loan to Shri. Ponnappan - Although the assessee claims to have paid loan through RTGS, but could not reconcile payment through bank to incriminating material found during the course of search. Therefore, we are of the considered view that there is no error in the reasons given by the AO to make additions towards unaccounted cash loan of Rs. 25 lakhs given to Shri. Ponnappan. Unaccounted cash loan to Shri. S. Muruganathan - Since, the assessee could not explain source for cash loan, in our considered view the AO has rightly made additions. Undisclosed business income, being money swindled by ex-employee - Addition on protective basis - HELD THAT - The amount swindled by Smt. Dhanalakshmi has already been assessed in the hands of M/s. Miracle Cars India Pvt Ltd., on substantiate basis. Therefore, in our considered view additions made in the hands of the assessee towards money swindled by Smt. Dhanalakshmi on protective basis cannot be upheld, because addition, if any, then same has to be in the hands of the M/s. Millennium Motors but not in the hands of the assessee. Therefore, the addition if any to be made, then it should be made in the hands of M/s. Millennium Motors itself. Since, the Assessing Officer already made additions towards money swindled by Smt. Dhanalakshmi in the hands of the company on substantive basis, protective addition made in the hands of the assessee has no legs to stand. Difference between income returned originally and income returned in response to 153A notice - The assessee could not satisfactorily explain reduction in income declared in the return of income filed u/s. 153A of the Act, when compared to income admitted in the return of income filed u/s. 139 of the Act. Therefore, we are of the considered view that there is no error in the reasons given by the Assessing Officer to make additions towards difference in income returned and admitted for assessment year 2009-10 to 2011-12 and thus, we uphold the additions made by the Assessing Officer. Addition towards unaccounted sales - Since, there is no clear finding from the AO with regard to the said addition, except so called sales abstract found in the computer of the assessee and also it was the claim of the assessee that said transaction pertains to M/s. Arputharaj Associates, a partnership firm, we are of the considered view, that the issue needs to go back to the file of the AO for further verification. Thus, we set aside the orders of the lower authorities on this issue and restore the issue to the file of the AO for further verification. The Assessing Officer is directed to examine the issue in light of relevant material and ascertain the real beneficiary of said transactions.

Summary

Issues Involved:
1. Loans to M/s. Kangaroo Impex and consequent interest for assessment year 2009-10 & 2010-11.
2. Investment in M/s. Mars Export for assessment year 2010-11 & 2011-12.
3. Unaccounted cash loans for assessment year 2009-10 & 2010-11.
4. Money swindled by Mrs. Dhanalakshmi, employee of the assessee for assessment years 2011-12 to 2015-16.
5. Difference between income returned originally and income returned in response to notice u/s. 153A of the Income-tax Act, 1961 for assessment year 2009-10 to 2011-12.
6. Additions towards unaccounted sales for assessment year 2014-15.

Summary:

1. Loans to M/s. Kangaroo Impex and Consequent Interest:
The assessee advanced loans to M/s. Kangaroo Impex, which were disputed during the assessment for AY 2009-10 and 2010-11. The Assessing Officer (AO) treated these loans as unexplained investments under Section 69 of the Act due to the lack of satisfactory explanation regarding the source. The Tribunal remitted the issue back to the AO for re-examination, directing verification of the assessee's claim that the loans were given through bank transactions and to ascertain facts from M/s. Kangaroo Impex and its partners.

2. Investment in M/s. Mars Export:
The AO added Rs. 16.5 crores as unexplained investment for settling liabilities of M/s. Mars Exports. The Tribunal noted contradictions in the facts and remitted the issue back to the AO for verification of the settlement of liabilities and repayment of loans to Karur Vysya Bank. Additionally, the AO's addition of Rs. 16 crores as unaccounted income for AY 2011-12 was also remitted for fresh consideration, considering the pending valuation report from the DVO.

3. Unaccounted Cash Loans:
The AO made several additions towards unaccounted cash loans given to various parties for AY 2009-10 and 2010-11. The Tribunal upheld some additions where the assessee could not explain the source of cash loans, such as loans to Shri. C. Giridharan, Shri. C. Hariharan, and others. However, certain additions were remitted back to the AO for further verification, such as loans to Shri. C. R. Narayanasamy and Shri. Paulraj, where the mode of payment and source needed re-examination.

4. Money Swindled by Mrs. Dhanalakshmi:
The AO made a protective addition of Rs. 8,30,67,068/- for AY 2011-12 to 2015-16, considering the money swindled by Smt. Dhanalakshmi from M/s. Millennium Motors. The Tribunal directed the deletion of the protective addition in the assessee's hands, as the money swindled pertained to M/s. Millennium Motors, and substantive addition had already been made in the company's assessment.

5. Difference Between Income Returned Originally and Income Returned in Response to Notice u/s. 153A:
The AO made additions for the difference in income declared in the original return and the return filed in response to notice u/s. 153A for AY 2009-10 to 2011-12. The Tribunal upheld these additions as the assessee could not satisfactorily explain the reduction in income.

6. Additions Towards Unaccounted Sales:
The AO added Rs. 11,12,62,000/- as unaccounted sales for AY 2014-15 based on a seized sales abstract. The Tribunal remitted the issue back to the AO for further verification, directing examination of the real beneficiary of the transactions and to ascertain if the transactions pertain to M/s. Arputharaj Associates, a partnership firm.

Conclusion:
The appeals filed by the assessee for AY 2009-10 to 2015-16 were partly allowed for statistical purposes, with several issues remitted back to the AO for re-examination and verification.