9911796707
TMI Blog2018 (10) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... d of adjudication at the level of the assessing authorities - entire issue of unsecured loans raised in all the appeals is required to be remanded to the file of AO. Addition on account of agricultural income - Held that:- Considering the adhocism involved in this matter, we find the average of all the above comes very close to the decision of 65% as held by the CIT(A) in his order. Therefore, we are of the opinion that the decision of CIT(A) is appropriate and it does not call for any interference. Accordingly, the relevant grounds raised by the assessee are dismissed. Unexplained expenditure on account of Elections - Held that:- The matter stands remanded to the file of AO for examination of the facts and for want of a fresh order on this issue. AO is directed to decide the issue in the light of the seized papers on one side and the order of ITSC, disclosures made by the family members, on the other side giving effect to the same after hearing the assessee. AO shall note that order of settlement of ITSC is binding on the Income-tax authorities and not on the Tribunal. With these directions, this entire issue of unexplained expenditure on elections stands remanded to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not filed any cross appeal for the A.Y. 2011-12. 2. Briefly stated relevant facts of the case include that the assessee is an individual and one of the Directors of M/s. Parag Milk and Milk Products Pvt. Ltd. There was action u/s.132 of the Act on Parag group of cases on 04-02-2011. Accordingly, as per the due process of law, the assessments were completed u/s.153A of the Act. Before us, there is no issue relating to the incriminating material or non-abated assessments etc. The appeals pertain to the A.Yrs. 2007-08 to 2011-12. During the assessment, the AO made various additions and the details of returned income, additions made and the assessed income are tabulated as under: Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 Returned income 34,92,176 2,67,24,730 1,23,23,550 54,32,410 1,16,77,560 Unexplained cash credit u/s.68 32,50,000 46,00,000 68,10,000 Unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unexplained expenses 3.50 crs 1,58,06,000 Unexplained silver 2.20 lakhs Unaccounted investment in loan given 10 lakhs Unexplained investment in FDR 2,30,970 R=Revenue appeal A=Assessee Appeal 2.2 Referring to the all the 6 additions mentioned above, Ld. Counsel for the assessee narrated the relevant facts and made various submissions. Referring to the fate of the appeals before the First ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Jain-Rs.5,00,000/- (7) Sambhav Deep- ₹ 5,00,000/- and (8) Tarla D. Shah-Rs.3,00,000/-. The details are given in the table at Para No.3.2.1 of the order of CIT(A). AO added the said amount of ₹ 32.50 lakhs for want of details. In para No.5 of the assessment order, the AO held as under : The details of loan provide by such parties were scrutinized and in the case of following partier, neither genuineness nor creditworthiness of such parties was proved. The same is presented along with the reasons for treating them as non-genuine loan in tabular form as per Annexure-A, enclosed and made part of assessment order. As already discussed evidences have been gathered during search action, that assessee group has generated unaccounted money on sale of milk products and has made investments in properties. Under these circumstances, onus was on assessee to prove the genuineness of loan and as assessee has failed to do so, hence, ₹ 32,50,000/- was added back in the income of assessee u/s.68 of the Act. From the above, it is evident that the assessee failed to prove the genuineness of the transaction and creditworthiness of the parties. It is the case of the AO tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the acknowledgment of the return filed by the lenders. This evidence was forwarded to the learned AO for his remand report. The learned AO in his remand report has repeated the same facts, which were mentioned in the assessment order without carrying out any enquiries. 3.2.8 In my view, the learned AO s allegation of the Appellant routing his unaccounted money in form of the cash credit may be true. However, when the Appellant has furnished the loan confirmation letters with the details of the cheque payment, it is not possible to make the addition without bringing evidence on record as to how these loans are not genuine. This is also because law does not permit examination of the source of source . The learned AO has relied on the Appellant s admission before the Honourable Settlement Commission in the case of Bhagyalaxmi Dairy Private Limited, in which it was stated that some of the parties are not genuine. 3.2.9 I do not agree with AO on this argument because of the two reasons: firstly, the Appellant made the admission before the Honourable Settlement Commission in the case of Bhagyalaxmi Dairy Private Limited with respect to share application money transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this Ground of Appeal are covered by the findings on Ground of Appeal 2 of the A.Y. 2008-09. Same findings will be applicable here. However, I find on the examination of the loan confirmations submitted by the Appellant that the lenders Shri Dilip Shah (HUF) with the loan amount of ₹ 85,000 has not signed loan confirmation. Its loan confirmation is signed by someone else on its behalf as for . Since, the loan confirmation is not signed by the lender; the requirement of establishing genuineness of the loan transaction is not satisfied. Therefore, I confirm the addition of ₹ 85,000 with respect to loan to Shri Dilip Shah (HUF). Further, Smt. Rekha Shah had stated in his statement recorded u/s.131 that she is a lady without means. The Appellant has not controverted her statement in his written submission. Therefore, I confirm the addition of ₹ 1,45,000/- with respect to her loan. Further I find that the signature of one of the lender Smt. Varsha S. Shah is different in her loan confirmation filed in the A.Y. 2009-10 than her loan confirmation filed in the A.Y. 2010-11. Therefore, according to me, her loan confirmations are not credible. Therefore, I confirm th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose transaction that the share application money contributed to M/s. Bhagyalaxmi Dairy Pvt. Ltd., are bogus. CIT(A) is of the opinion that non-genuine transactions were already offered by the assessee through the ITSC and it has become final. Therefore, it is an admitted fact that there are common names in the loan creditors and the list of investments in shares of certain companies of the group. This is the admitted position as evident from the application filed before the ITSC. It is the claim of the assessee that the transactions entered into by such names of persons can be partly genuine when it comes to unsecured loans and partly bogus when it comes to investment in shares . This aspect was not properly examined by the CIT(A) applying the strict tests while adjudicating the issue and while granting part relief to the assessee. This is the case of Revenue, when it comes to the unsecured loans, that the relief was liberally granted by the CIT(A) without scrutinizing the loan transactions properly. Further, we examined the documentation filed by the assessee with regard to the correctness of the transactions of loan creditors. We find all is not well with the documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, I agree with the learned AO that the net agricultural income @88% of the gross agricultural income is highly excessive and is not in accordance with the reality. It is known that an expense as low as @12% of the gross agricultural income is not prevalent in agricultural activity. Therefore, According to me, this is not the case of the excess agricultural income declared by the Appellant but is the case of suppression of agricultural expenses. Accordingly, in absence of the evidence, I estimate the Appellant s net agricultural income @65% of the gross agricultural income on ad-hoc basis as against @40% estimated by the learned AO. The learned AO is directed to work out the net agricultural income @65% of gross agricultural income as declared by the Appellant. 5.2 Before us, Ld. Counsel for the assessee argued that the figures of the assessee are based on the practical expenses of the assessee. Therefore, the order of the CIT(A) should be restored. In this regard, assessee furnished extract of agricultural income and expenses incurred copies of which are placed in pages 297 to 308 of the paper book. Ld. Counsel relied on the decision of Pune Bench of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,58,06,000/- for the A.Y. 2010-11. There was search and seizure action on the assessee u/s.132 of the Act on 04-02- 2011. During the search, certain papers were seized from the office premises of M/s. Parag Milk and Milk Products Pvt. Ltd. Analysis of the writings on the said papers revealed that the same pertains to the details of the expenditure incurred during the elections of Zilla Parishad and Panchayat. It appears that the assessee incurred the said expenditure on behalf of the candidates who belong to the National Congress Party (NCP) contesting from Ambegaon Constituency of Zunnar block. There was recording of statement on oath from Shri Bangar, Accountant of the assessee. According to his statement ₹ 3.50 crores was spent in cash (Para No. 2.2.5 of the order of CIT(A) and Para 5 of the assessment order). In response to Question No.6, Mr. Bangar relying on the summary sheet, stated that the total expenditure on the said elections amounts to ₹ 4,03,95,768/-. On the said papers, cash receivable and received from Dilip A. Shah in cash total to ₹ 3.50 crores. When the question was raised about the source of this cash receivable and received assessee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application on account of the unaccounted expenditure. Subsequently, the Appellant offered the additional income of ₹ 4 cr on this account. Accordingly, I find that this issue is covered by the order of the Settlement Commission. Therefore, I delete the addition of ₹ 3,50,00,000 made by the learned AO. 6.3 Before us, Ld. Counsel for the assessee made written submissions which is found very close to the written submissions made before the CIT(A). Contents of Para No.4.4 to 4.8 of the said written submissions are extracted here as under : 4.4 In support of our above contention, we also wish to draw kind attention of Your Honour to Para 18 on page 29 and 30 of the order of Settlement Commission wherein our request giving credit of ₹ 14 crore against addition made in individual members amounting to ₹ 9.90 crs was made. The Honourable Commission has accepted our request (Refer para 18 on page 29 of the order, page 101 and 102 of PB-1) Photo copy of the order is enclosed (Refer Page No.73 to 111 of PB-1) 4.5 In the circumstances, since the issue is covered by the Settlement Commission the addition made by the AO on the same issue and the seized papers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication before the ITSC and the same has been accepted by the ITSC. Thus offer of additional income was made in the hands of the companies. Additional income was not offered in the hands of the names appearing in the seized papers. Going to the bifurcation of this claim of expenditure outside the books of account, the case of the AO is that a sum of ₹ 5.12 crores was incurred by Devendra P. Shah (assessee). It is also the claim of the assessee that the entire unexplained expenditure on elections of ₹ 5.12 crores was owned up by the company and paid the taxes and the same is evident from the order of ITSC (supra). But it is not clear as to whether the entire sum of ₹ 5.12 crores is taxed effectively in the hands of the assessee or not and the reasons for offering the same in the hands of the company are specified. When the questions was raised by us on this issue, both the representatives of the Revenue and Assessee submitted that this is a matter of fact, which require scrutiny of the documents, disclosures made by the other family members as unaccounted expenditure on account of elections, the application before the ITSC, the order of ITSC etc. 6.6 On consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty proceedings u/s.271(1)(c) is initiated separately for concealment of particulars of income. 7.1 During the First Appellate proceedings, assessee made various submissions stating that the assessee paid ₹ 10 lakhs towards the loan and the loan was never returned. Eventually, the said loan has become irrecoverable resulting in bad debt and, therefore, the assessee requested to allow the claim as deduction as bad debt. He relied on the High Court judgment in the case of Indo Airways Pvt. Ltd. 349 ITR 85 (Delhi) and others. Eventually, the CIT(A) confirmed the addition made by the AO as per the discussion given in Para No.2.4.4. of his order. It is the decision of CIT(A) that assessee retracted the disclosure of ₹ 10 lakhs originally offered during the search action and assessee did not offer the same in the return filed u/s.153A of the Act. He rejected the assessee s submission that the amount is not recoverable. Relevant operational Para No.2.4.5. of the order of CIT(A) is extracted here as under : 2.4.5 I do not find any logic in the Appellant s arguments. According to me, the central issue here is; whether the loan of ₹ 10 lakhs advanced by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se which favour the assessee, reliance was placed on the decision of Hon ble Delhi High Court in the case of CIT Vs. Indeo Airways Pvt. Ltd. 349 ITR 85 (Del). 6.6 As the amount is irrecoverable, it is a loss which is allowable as deduction and therefore net addition called for is NIL. It is submitted that the addition made by AO and confirmed by the CIT(A) be deleted. 7.3 On the other hand, Ld. DR relied on the orders of AO/CIT(A). 7.4 We heard both the sides and perused the orders of the Revenue and the written submissions of the assessee. We find the case of the assessee is that amount of ₹ 10 lakhs was paid and the same was never returned by the assessee and therefore, it has become a bad debt. For allowing the bad debt, there is need for fulfilling certain conditions by the assessee. It has to be examined if the assessee is a financier and is regularly engaged in the business of money lending/financing activities. This aspect was not examined by the lower authorities before rejecting the claim of the assessee. There is also need for examining the debtor and the reasons for not returning the said payment of ₹ 10 lakhs. Therefore, considering the peculiarity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 2,30,970/- invoking the provisions of section 69 of the Act. AO held that the investments are not recorded in the books of account of the assessee. AO treated the same as undisclosed income of the assessee as unexplained investment in FDs. 8.2 In the First Appellate proceedings, assessee made various submissions and discussed the details of FDs maintained by the assessee in different banks and Pat Sansthas. CIT(A) noted that the assessee never filed the returns in HUF capacity before the search action. No financial statements of the HUF were also filed. CIT(A) observed that the FDs are held in the individual names not in the name of the HUF. CIT(A) extracted the written submissions of the assessee in Para No.2.3.3. and also considered the additional evidences furnished by the assessee before him. CIT(A) called for the remand report on the said documents. CIT(A) also called for the counter comments from the assessee on the findings of the AO. Eventually, the CIT(A) discussed this issue in Para No.2.3.6 to 2.3.8 and rejected the assessee s contention before confirming the additions of ₹ 2,30,970/-. CIT(A) noted in these paras that the assessee s request for subscribin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the assessee that the source for the same is the proceeds received by the assessee on maturity of the earlier FDs. There is need for furnishing the cash flow of the matured FDs which form part of the new FDs of ₹ 2,30,970/-. It is an admitted fact before us that the assessee offered only an amount of ₹ 79,771/- as additional income for taxation and not the entire addition of ₹ 2,30,970/-. However, Ld. AR firmly submitted that the entire FDs of ₹ 2,30,970/- is explainable if time is granted before the AO. In our view, this matter needs examination in the light of the details of the cash flow. In case of availability of sufficient cash balance is demonstrated by the assessee in the remand proceedings, the benefit of excess cash needs to be granted in favour of the assessee. Only exception to this principle is that the AO should examine the likely use of such excess cash for any other expenditure other than for making the said FDs of ₹ 2,30,970/- claimed by the assessee. With these directions, the issue raised by the assessee in the appeals is allowed for statistical purposes. 9. In the result, all the appeals of the assessee are partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
