2013 (11) TMI 805 - AT - Income Tax

Income-tax block assessment: loose papers rejected, family gift accepted, but unexplained third-party loan addition upheld

ITAT Hyderabad-AT held that additions for alleged unaccounted investment in property were unsustainable, as the Revenue relied only on loose papers and ... Unaccounted investment in purchase of property - deriving income from salary and house property - search action notices u/s 153C/142(1) - corroborative evidence - loose paper - Held that:- The Department is not able to unearth any document or material or any corroborative material to show that the assessee herein actually paid for purchase of the property. The Department cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion however strong, cannot take place of material in support of the finding from the AO. The AO should act in a judicial manner, proceed with judicial spirit and come to a judicial conclusion. The AO is required to act fairly as a reasonable person and not arbitrarily and capriciously. The assessment made should have enough material and it should stand on its own legs. The basis for addition cannot be only the loose sheet or a third party statement. In the absence of corroborative material, circumstantial evidence, we are not in a position to sustain the addition. In our opinion, no addition can be made on a dumb document and noting on loose sheet. It should be supported by the evidence on record and the evidence on record is not sufficient to support the Revenue's action. In a block assessment undisclosed income has to be determined on the basis of the material and evidence detected in the course of the search action. The circumstances surrounding the case are not strong enough to justify the addition made by the Department. Addition on amount received from the assessee's father - In our opinion, out of natural love and affection to settle the life of his daughter assessee's father has given the gift of ₹ 5 lakhs. We find no reason to sustain this addition. Accordingly placing reliance on the judgment of the Hon'ble Supreme Court in the case of CIT v. P. Mohanakala [2007 (5) TMI 192 - SUPREME COURT], wherein it was held that where there is a relation between the donor and the donee and there was an occasion to make gift, the same has to be considered as genuine. In the present circumstances, the donor was assessee's father and the gift was given to settle the life of his daughter, the assessee and the donor being a father, it is natural in the Indian social system to give gift to daughters. Accordingly we delete the addition. Addition on loan obtained from S. Sudha Rani w/o Shri Veeraiah Choudhury. This loan was said to have been received from S. Sudha Rani whose husband Sri Veeraiah Choudhury was friend of assessee's father late Sri K.V. Mallikarjun Rao. However, the assessee could not furnish any confirmation letter except furnishing of a self-declaration. The assessee also stated that she does not know Smt. S. Sudha Rani personally. Being so, this unsubstantiated credit cannot be considered as genuine and the same has to considered as income of the assessee and has to be brought to tax. The assessee has not proved the genuineness of this amount. The addition is sustained. Accordingly this ground is dismissed. In the result, appeal of the assessee is partly allowed. Issues Involved:1. Addition of Rs. 1 crore on account of unaccounted investment in the purchase of property.2. Addition of Rs. 5 lakhs received from the assessee's father.3. Addition of Rs. 5 lakhs loan obtained from S. Sudha Rani.4. Validity of notice issued under s. 153A.Issue-wise Detailed Analysis:1. Addition of Rs. 1 crore on account of unaccounted investment in the purchase of property:The primary issue in this appeal concerns the addition of Rs. 1 crore attributed to unaccounted investment in the purchase of a property. The facts reveal that during a search action at the premises of Shri C. Radha Krishna Kumar, a diary was seized which indicated that the actual consideration for the property was Rs. 165 lakhs, whereas the registered sale deed showed Rs. 65 lakhs. The Assessing Officer (AO) concluded that there was an 'on-money' payment of Rs. 1 crore. The assessee denied knowledge of the cash payments, stating the transaction was managed by her brothers. The AO relied on the seized diary and statements from the seller and the assessee's brother to justify the addition.Upon appeal, the CIT(A) upheld the AO's decision. However, the Tribunal found that the evidence, including the seized diary and statements, was insufficient to conclusively prove the payment of Rs. 1 crore as 'on-money.' The Tribunal emphasized that the seized material did not contain any direct reference to the assessee and lacked corroborative evidence. The Tribunal concluded that the addition was based on conjectures and surmises, and hence, deleted the addition of Rs. 1 crore.2. Addition of Rs. 5 lakhs received from the assessee's father:The second issue pertains to the addition of Rs. 5 lakhs received from the assessee's father, which the AO treated as not genuine. The assessee argued that the gift was given out of natural love and affection. The Tribunal noted that the Department did not dispute the relationship between the donor and the donee or the occasion for the gift. Citing the Supreme Court judgment in CIT v. P. Mohanakala, the Tribunal held that the gift was genuine and deleted the addition of Rs. 5 lakhs.3. Addition of Rs. 5 lakhs loan obtained from S. Sudha Rani:The third issue involves the addition of Rs. 5 lakhs purportedly received as a loan from S. Sudha Rani. The assessee failed to provide a confirmation letter, and the AO treated the loan as unsubstantiated. The Tribunal upheld the AO's decision, stating that the assessee could not prove the genuineness of the loan. Consequently, the addition of Rs. 5 lakhs was sustained.4. Validity of notice issued under s. 153A:The final issue concerns the validity of the notice issued under s. 153A. The assessee argued that the notice was invalid as there was no search action under s. 132 against her, and at best, a notice under s. 153C should have been issued. However, the Tribunal noted that the assessee did not press this ground during the hearing and that under s. 292BB, the assessee could not raise objections after cooperating during the assessment. Therefore, this ground was dismissed.Conclusion:The Tribunal partly allowed the appeal, deleting the addition of Rs. 1 crore and Rs. 5 lakhs received from the assessee's father, while sustaining the addition of Rs. 5 lakhs loan from S. Sudha Rani and dismissing the ground regarding the validity of the notice under s. 153A.