2014 (8) TMI 1059 - AT - Income Tax

Tax Appeals Decisions: Dismissed Some, Partly Allowed Others. Unexplained Credits & Investments Confirmed.

Smt. Asha Sunil and Shri O.G. Sunil Versus Dy. CIT, Cent. Cir. 2, Kochi

The Tribunal dismissed the appeals in ITA Nos 42 to 44/Coch/2014 and partly allowed the appeals in ITA Nos 45 to 51/Coch/2014. Most additions made by the ... Addition of unexplained credits in the bank account - Held that:- We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee deposited ₹ 3,33,815 in the bank account. Though the assessee claims that this was a trading receipt from garment business, the income from trading of garment is only ₹ 58,250. The assessee could not explain the source from where the deposits were made. Even before this Tribunal, the assessee could not explain the source and means for deposit of ₹ 3,33,815. In the absence of any material and explanation from the assessee, this Tribunal is of the considered opinion that the assessing officer has rightly treated the deposit in the bank as unexplained investment. Therefore, the order of the lower authority on this issue is confirmed. - Decided against assessee Addition on investment in property - Held that:- The fact that the assessee purchased property by investing an amount of ₹ 7,10,000 is not disputed. Therefore, it is for the assessee to explain from where the assessee got the funds for making investment and why the same should not be treated as income of the assessee. The assessee has no explanation to offer. Therefore, this Tribunal is of the considered opinion that the assessing officer has rightly taken the entire amount as income of the assessee. This Tribunal do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed. - Decided against assessee Addition towards unexplained investment in the bank account and profit from sale of land - Held that:- The assessee has to explain the source for making investment in the landed property. The assessee is engaged in the real estate business, therefore, the profit arising out of purchase and sale of real estate has to be treated as unexplained income. In the absence of any details, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. It is for the assessee to explain the source for making the deposit in the bank and the source for making the investment in the landed property. It is also the responsibility of the assessee why such investment should not be treated as income of the assessee. In the absence of any explanation from the assessee, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. Accordingly, the order of the CIT(A) on this issue is confirmed. - Decided against assessee Ingenuity of gift - Held that:- To accept the gift, the assessee has to definitely establish the creditworthiness of her father. The contention of the ld.counsel for the assessee is that if the assessee could not explain the creditworthiness, the addition could be made only in the hands of the assessee’s father. The case of the department as it appears from the assessment order clearly shows that Shri George Philip acted as an agent for transfer of funds from unknown person to Smt. Asha Sunil. The assessing officer has also found that the assessee’s father’s bank account is only a conduit for transfer of funds from unidentified person. In the absence of any material to suggest that the assessee’s father has sufficient creditworthiness to credit such a huge money to the assessee, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. The onus is on the assessee to prove the creditworthiness of her father, genuineness of the transaction and identity of the parties. In this case, though the assessee claims that the funds were transferred from her father’s account, the creditworthiness is not proved. Merely because the funds were transferred from banking channel, it will not prove the genuineness of the transaction as held by the Apex Court in the case of P Mohanakala ( 2007 (5) TMI 192 - SUPREME Court ) - Decided against assessee Undisclosed deposits - Held that:- The assessee has withdrawn an amount of ₹ 2,91,600 from the bank. Since the amount was withdrawn from bank out of the deposit made in the bank, this Tribunal is of the considered opinion that ₹ 2,91,600 which was withdrawn from bank cannot be treated as income of the assessee. In other words, the amount of ₹ 2,91,600 was part of ₹ 15,04,891 which was already added by the assessing officer and addition of ₹ 2,91,600 once again would amount to double addition. Therefore, this Tribunal is unable to uphold the addition made by the assessing officer to the extent of ₹ 2,91,600 on the basis of the cash withdrawals made by the assessee from the bank account. Accordingly, the order of the lower authority is set aside and the assessing officer is directed to delete the addition of ₹ 2,91,600 with regard to cash withdrawal from the bank as shown in the cash flow statement. - Decided against assessee in part Addition of foreign travel expenses - Held that:- It is an admitted fact that the assessee undertook foreign travel during the year under consideration. The source for the expenditure was not disclosed before the assessing officer. It is also not disclosed in the cash flow statement. The assessee is also not maintaining any books. In those circumstances, the CIT(A) has rightly made addition to the extent of ₹ 5 lakhs. In total the unexplained investment and expenditure to the tune of ₹ 33,75,410 is confirmed out of the addition of ₹ 36,67,010. The assessing officer is directed to delete the addition of ₹ 2,91,600. - Decided against revenue Issues Involved:1. Validity of assessment under Section 153A.2. Addition of unexplained credits in bank accounts.3. Addition of unexplained investments in property.4. Addition of unexplained investments and profits from real estate transactions.5. Addition of unexplained foreign funds transfer.6. Addition of unexplained bank deposits and foreign travel expenses.Issue-wise Detailed Analysis:1. Validity of Assessment under Section 153A:The appellant challenged the validity of the assessment order passed under Section 153A of the Income Tax Act, arguing that no search proceedings or search warrant were issued in their case. However, upon verification, it was confirmed that a search was indeed conducted, and a search warrant was issued in the appellant's name. Consequently, the additional ground questioning the validity of the assessment under Section 153A was withdrawn by the appellant and dismissed by the Tribunal.2. Addition of Unexplained Credits in Bank Accounts:In the case of Smt. Asha Sunil for the assessment year 2006-07, the appellant could not satisfactorily explain the source of deposits amounting to Rs. 3,33,815 in her bank account. Although the appellant claimed these were trading receipts from her garment business, the income declared from the business was only Rs. 58,250, which was insufficient to justify the deposits. The Tribunal upheld the assessing officer's decision to treat the deposits as unexplained investments.3. Addition of Unexplained Investments in Property:The appellant purchased a property for Rs. 7,10,000, including stamp duty and other expenses, but failed to explain the source of funds. The Tribunal confirmed the assessing officer's decision to treat the entire amount as income, as the appellant did not provide any satisfactory explanation.4. Addition of Unexplained Investments and Profits from Real Estate Transactions:For the assessment year 2007-08, the appellant could not explain the source of Rs. 38,39,969 deposited in the bank account, which was claimed to be from the sale of land. The assessing officer found that the land was purchased during the same assessment year, and the appellant failed to provide details of the transactions. The profit from the sale of land was treated as business profit. The Tribunal upheld the addition due to the absence of any detailed explanation from the appellant.5. Addition of Unexplained Foreign Funds Transfer:For the assessment year 2008-09, the appellant received Rs. 6,67,68,547 through telegraphic transfer from Singapore to her father's account, which was subsequently transferred to her account. The appellant claimed this was a gift from her father, an aircraft maintenance engineer in Bahrain. However, the Tribunal noted that the funds were transferred shortly after being credited to her father's account, suggesting it was not from his savings. The appellant failed to prove her father's creditworthiness and the genuineness of the transaction. The Tribunal upheld the addition, citing that the appellant could not establish the source and nature of the funds.6. Addition of Unexplained Bank Deposits and Foreign Travel Expenses:In the case of Shri O.G. Sunil for the assessment year 2002-03, the appellant could not explain the source of Rs. 15,04,891 deposited in the bank. The Tribunal confirmed the addition, noting the appellant's failure to maintain books of accounts and provide details of the persons from whom money was received. The unexplained credits of Rs. 10,77,219 were also treated as income due to the lack of details. However, the Tribunal directed the deletion of Rs. 2,91,600, which was a withdrawal from the bank, to avoid double addition. The addition of Rs. 5 lakhs for foreign travel expenses was upheld as the appellant did not disclose the source of funds.Consolidated Outcome:The Tribunal dismissed the appeals in ITA Nos 42 to 44/Coch/2014 and partly allowed the appeals in ITA Nos 45 to 51/Coch/2014, confirming most of the additions made by the assessing officer while directing the deletion of specific amounts to avoid double addition.