2014 (4) TMI 736 - AT - Income Tax

Tribunal dismisses Revenue's appeals, partially allows Assessee's appeals. Assessing Officer's additions unjustified. CIT(A)'s findings upheld.

The Tribunal dismissed the Revenue's appeals and partly allowed the Assessee's appeals. It confirmed that the additions made by the Assessing Officer were ... Deletion of unexplained investment – Purchase of plots – Held that:- CIT(A) was of the view that there is no contrary information related to the issue to disprove the submissions made by the appellant - the addition could not be made on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant - the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the AO summarily - Nothing was brought on record to counter the findings of the CIT(A) - the amounts are already assessed in the hands of individual and as there is no business in the hands of the firm – Decided against Revenue. Income from sale of plots – Held that:- CIT(A) was of the view that the AO has gone by the mere indication of the details inscribed at the referred pages of the annexure without getting into the details related to the nature of the transactions and their relevance either in the books of the appellant or any other entity of the group - in the absence of any specific information or the evidence gathered against the submissions of the appellant, the AO is not justified in treating the entire amount by estimation and presumption in the hands of the appellant firm - the additions made merely based on the information in seized material without a corroborative evidence is not sustainable - there was no reason to interfere with the well-reasoned order of the CIT(A) – AO was not correct in making the addition in the hands of the firm - firm has not done any real estate business and entire business was done by the individual in his individual capacity – the order of the CIT(A) upheld – Decided against Revenue. Validity of admission of additional evidence – Violation of Rule 46A of the Rules - Held that:- The assessee has not furnished any additional evidence which was not filed before the AO and only an affidavit was filed before the CIT(A), which cannot be considered as additional evidence – Decided against Revenue. Income from plots – Held that:- CIT(A) was of the view that the basis for making the addition by treating the amounts inscribed in the seized material referred above is the mere indications of figures of amounts made in the seized material - the AO has not made any enquiries or investigations to disprove the claim of the appellant that amounts do not belong to the firm - there is no adverse information to dispute the claim of the appellant - there is no further basis for making the addition in the hands of the appellant firm under the head 'income from plots' – there was no reason to differ from the findings of the CIT(A) – the AO seems to have not applied his mind to any of the submissions and has in fact made addition again - the additions were made purely on presumptions and surmises - Decided against Revenue. Deletion towards commission from chits and investment in loans – Unexplained income – Held that:- There is no reason to interfere with the orders of the CIT(A) - As far as the transactions pertaining to the individual Shri K.C. Reddappa Naidu, the same cannot be brought to tax in the hands of the firm - deletion by the CIT(A) is correct - As far as the verification to be done with reference to transactions of others as directed by the CIT(A), this verification is required as the AO did not make any enquiries - there is no discussion also about the quantification of the amounts, details of the entries made in the seized material and very cursorily the Assessing Officer made the addition – the CIT(A) directed correctly to make the verification of the same to bring it to tax in the respective hands - Since assessee is not having any business on its own in real estate, nothing can be brought to tax in the hands of the assessee as such - To that extent, the deletion by the CIT(A), of the amount which was contended by the Revenue in its ground, is confirmed - assessee’s ground is also upheld as the same need to be assessed in the respective persons hands and not in the hands of the assessee – Decided against Revenue. Deletion of amount expended for gift items – Deletion made on amounts borrowed – Deletion of unaccounted receipts - Held that:- CIT(A) was of the view that the expenses were meant for the gifts for the new business of chit fund, which was not started yet - incurring of such expenses do not arise as per the appellant, which was not refuted by the Assessing Officer, with a concrete and correct evidence - the addition could not be made on the basis of a seized material presumed to be coded figures or the actual figures, without bringing any corroborative material evidence, in support thereof, and no addition can be made, if primary burden is discharged by the appellant – the addition based on loose sheets and presumptions of the AO based could not be sustained in absence of any corroborative material or evidence brought on record - the facts are that the information in seized material was not put to further tests or examinations and the explanation of the assessee has been rejected by the AO - the Revenue is contesting the factual aspects decided by the CIT(A) - The AO did not consider the assessee’s partner submissions that most of the amounts were accounted for in the hands of individual and entries are not belonging to the firm - Since the firm did not do any business either in real estate or in chit business, question of making additions in the hands of the firm does not arise – thus, the order of the CIT(A) on all the grounds is confirmed as he has examined the issues factually – Decided against Revenue. Deletion of receipts from real estate business – Held that:- CIT(A) was of the view that the proceeds were shown to be precisely related to 'Ganesh Gardens' venture, whose receipts are accounted for in the assessment years 2006-07 to 2008-09 - The appellant also explained the corrections in the figure on account of the duplication of certain sale values thereby arriving at the correct figure related to the transactions - the amounts are explained to be related to Sri K.C.Reddappa Naidu in his individual status, the addition of the same amounts in the hands of the appellant firm are not justified - there is no reason to differ from the findings of the CIT(A) - Revenue has not made out any case to make the addition in the firm’s hand when it is already a fact on record that firm has not done any real estate business – Decided against Revenue. Addition on account of unaccounted advances – Held that:- The CIT(A) was of the view that there is no reason to interfere with the order of the CIT(A) as it is very clear that the figures 98,99,100 does not reflect any money but numbers of plots under sale - the addition per se of the plot numbers cannot be made as advance received – non-application of mind by the AO while making the addition - the fact is that the assessee firm has not involved itself in any real estate business and the transactions pertaining to individual Shri K.C. Reddappa Naidu or other persons – Decided against Revenue. Issues Involved:1. Unexplained investment in purchase of plots.2. Income from the sale of plots.3. Admission of additional evidence.4. Income from plots.5. Unexplained income from chits and investment in loans.6. Unexplained payments.7. Unaccounted receipts and advances.8. Expenditure on gift items.9. Borrowed amounts.10. Unaccounted income from sale of land.11. Receipts from real estate business.Issue-wise Detailed Analysis:1. Unexplained Investment in Purchase of Plots:The Assessing Officer (AO) added Rs.4,91,000/- as unexplained investments based on seized material. The CIT(A) deleted this addition, explaining that the amounts mentioned were receipts from the sale of plots, not investments. The judicial rulings supported that additions based on presumptions without corroborative evidence cannot be sustained. The Tribunal upheld the CIT(A)'s decision, confirming that the amounts were already assessed in the individual's hands and there was no business in the firm's hands.2. Income from the Sale of Plots:The AO made an addition of Rs.1,38,84,300/- treating the income from the sale of plots as unexplained. The CIT(A) deleted this addition, stating that the transactions were accounted for in the individual's status and there was no evidence to suggest otherwise. The Tribunal agreed with the CIT(A), noting that the firm did not engage in real estate business and the income was rightly assessed in the individual's hands.3. Admission of Additional Evidence:The Revenue contended that the CIT(A) admitted additional evidence without giving the AO an opportunity to verify it. The Tribunal found no merit in this ground as the affidavit filed was not considered additional evidence in this context.4. Income from Plots:The AO added Rs.2,20,21,668/- based on seized material. The CIT(A) deleted this addition, explaining that the transactions pertained to the individual's proprietary business and were duly accounted for. The Tribunal upheld the CIT(A)'s decision, confirming that the additions were made on presumptions without corroborative evidence.5. Unexplained Income from Chits and Investment in Loans:The AO added Rs.10,49,810/- as unexplained income from chits and investment in loans. The CIT(A) partially confirmed Rs.2,62,452/- of this amount. The Tribunal found no basis for the AO's quantification and deleted the entire addition, noting that there was no evidence of chit business or commission earned.6. Unexplained Payments:The AO added Rs.93,63,710/- based on a notebook found during the search. The CIT(A) reconciled the transactions and found that part of the transactions related to other entities and individuals. The Tribunal upheld the CIT(A)'s decision, confirming that the transactions were not related to the firm and required verification in respective hands.7. Unaccounted Receipts and Advances:For A.Y. 2007-08, the AO added Rs.87,26,000/- based on seized material. The CIT(A) deleted this addition, explaining that the transactions did not belong to the firm and were not corroborated by evidence. The Tribunal upheld this decision, noting that the firm did not engage in real estate business.8. Expenditure on Gift Items:The AO added Rs.50,000/- for gift items based on seized material. The CIT(A) deleted this addition, explaining that the expenditure was proposed and not incurred. The Tribunal upheld this decision, confirming that the addition was based on presumptions without evidence.9. Borrowed Amounts:The AO added Rs.60,800/- as unexplained borrowals. The CIT(A) deleted this addition, explaining that the amounts were advances given by the individual and not borrowals by the firm. The Tribunal upheld this decision, confirming that the addition was not justified.10. Unaccounted Income from Sale of Land:The AO added Rs.56,12,000/- based on a receipt. The CIT(A) deleted this addition, explaining that the transaction did not pertain to the firm and there was no evidence to support the addition. The Tribunal upheld this decision, confirming that the addition was not justified.11. Receipts from Real Estate Business:The AO added Rs.50,15,000/- treating the receipts as unaccounted. The CIT(A) deleted this addition, explaining that the transactions were accounted for in the individual's status. The Tribunal upheld this decision, confirming that the firm did not engage in real estate business.Conclusion:The Tribunal dismissed the Revenue's appeals and partly allowed the Assessee's appeals, confirming that the additions made by the AO were not justified and were based on presumptions without corroborative evidence. The CIT(A)'s detailed examination and factual findings were upheld.