2012 (10) TMI 294 - AT - Income Tax

Tribunal decisions on IT Act additions: some upheld, some dismissed.

Dy. Commissioner of Income Tax 4(1) Agra. Versus Shri Vijay Kumar Agarwal, & Others

The Tribunal confirmed the deletion of various additions made by the AO under the IT Act, including reductions in cash introduced, Bardana trading, ... Addition u/s 68/69 - CIT(A)restricted the addition - Held that:- The CIT(A) found that the assessee himself has disclosed Rs.12,50,000/- in the return of income. Therefore, this amount was also required set off and adjustment in the addition of Rs.1,31,70,346/- is required to be reduced. Even this amount of Rs.12,50,000/- is reduced from Rs.1,31,70,346/- and balance comes to Rs.1,19,20,346/-. In the light of above discussion the assessee was entitled to relief of set of Rs.12,50,000/- amount which has been already incurred in the return of income. Therefore, the relief to that extent was required to be granted but the CIT(A) allowed only Rs.11,70,346/- on the ground that the assessee himself has surrendered the amount at the time of assessment proceedings in the light of fact we do not think that the Revenue should have any grievance against the order of CIT(A) - against revenue. Addition under section 14A - Held that:- The CIT(A) has correctly appreciated the facts and found that entire funds of group has been channelised through Vijay Kumar Agarwal. There is an interest receipt of Rs.2,60,684/-. Therefore, interest pertaining to diversion of borrowed fund in share application is required to be restricted only in respect of net amount of interest. Thus the CIT(A) has rightly allowed relief of Rs.2,60,684/- and has correctly confirmed the addition to the extent of Rs.34,167/-. Activity related to Bardana and advances to farmers and charging of interest - Held that:- The pages of Paper Book referred by the assessee at the time of hearing requires necessary reconciliation. It has also been noticed that there is no consolidated reconciliation on record based on which it can be said that the transaction relating to Bardana and interest has been the entries for amounts which were considered for calculation of peak amount. In the absence of complete reconciliation of details in this regard that the transaction relating to Bardana and interest were included in the consolidated cash book on which basis a peak amount has been calculated. In the absence of complete facts, the issue pertaining to Bardana and interest cannot be decided at this stage the order of CIT(A) is not in accordance with section 250(6) & send back to decide the issue afresh. Issues Involved:1. Deletion of Rs. 11,70,346 out of the addition of Rs. 1,31,70,346 made by the AO under sections 68/69 of the IT Act.2. Deletion of Rs. 10,00,000 added by the AO on account of Bardana trading.3. Deletion of Rs. 5,78,262 added by the AO on account of interest income from loans to farmers.4. Deletion of Rs. 2,60,684 added by the AO by disallowing expenditure for earning exempted income.5. Confirmation of addition of Rs. 120 lakhs by CIT(A).6. Confirmation of addition of Rs. 34,167 out of Rs. 2,94,851 made by AO invoking section 14A.7. Confirmation of addition of Rs. 22,23,928 on account of undisclosed investment in Bardana.8. Confirmation of addition of Rs. 2,34,643 on account of unaccounted interest received on farmers' advances.Detailed Analysis:1. Deletion of Rs. 11,70,346 out of Rs. 1,31,70,346:The AO made an addition of Rs. 1,31,70,346 based on the cumulative peak of cash introduced during the year. The CIT(A) restricted the addition to Rs. 120 lakhs, considering the assessee's surrender during assessment proceedings. The CIT(A) gave credit for Rs. 35 lakhs already surrendered, reducing the addition by Rs. 11,70,346. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee had already disclosed Rs. 12,50,000 in the return of income.2. Deletion of Rs. 10,00,000 on account of Bardana trading:The AO added Rs. 10,00,000 for Bardana trading, but the CIT(A) deleted this addition, stating that the assessee had already surrendered Rs. 1.325 crores, covering this amount. The Tribunal upheld the CIT(A)'s decision, agreeing that the addition was unwarranted as it related to business activities already included in the surrendered amount.3. Deletion of Rs. 5,78,262 on account of interest income:The AO added Rs. 5,78,262 for interest income from loans to farmers. The CIT(A) deleted this addition, reasoning that it was part of the business activities covered by the Rs. 1.20 crores already confirmed. The Tribunal agreed, confirming the CIT(A)'s deletion of the addition.4. Deletion of Rs. 2,60,684 by disallowing expenditure for earning exempted income:The AO disallowed Rs. 2,94,851 under section 14A, related to interest on borrowed funds used for investments in shares. The CIT(A) allowed relief of Rs. 2,60,684, confirming only Rs. 34,167. The Tribunal found no infirmity in the CIT(A)'s order and confirmed it.5. Confirmation of addition of Rs. 120 lakhs:The CIT(A) confirmed the addition of Rs. 120 lakhs based on the assessee's surrender during assessment proceedings. The Tribunal dismissed the assessee's ground challenging this addition, as it was not pressed during the hearing.6. Confirmation of addition of Rs. 34,167 out of Rs. 2,94,851 under section 14A:The CIT(A) confirmed the addition of Rs. 34,167, finding that the interest pertaining to the diversion of borrowed funds was correctly restricted to the net amount of interest. The Tribunal upheld this decision, finding no error in the CIT(A)'s order.7. Confirmation of addition of Rs. 22,23,928 on account of undisclosed investment in Bardana:The AO added Rs. 22,23,928 for undisclosed investment in Bardana. The CIT(A) confirmed this addition, agreeing with the AO's apportionment based on rent received by each cold storage. The Tribunal found that the CIT(A) did not adequately address the assessee's reconciliation claims and remanded the issue back to the CIT(A) for a fresh decision.8. Confirmation of addition of Rs. 2,34,643 on account of unaccounted interest received on farmers' advances:The AO added Rs. 2,34,643 for unaccounted interest received on farmers' advances. The CIT(A) confirmed this addition. The Tribunal noted the need for a complete reconciliation of details and remanded the issue back to the CIT(A) for a fresh decision, as the CIT(A)'s order lacked adequate discussion.Conclusion:The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection in the case of Shri Vijay Kumar Agarwal. The appeal of the assessee in the case of Smt. Charu Agarwal was allowed for statistical purposes, with directions for the CIT(A) to re-examine the issues related to Bardana and interest.