2016 (2) TMI 340 - AT - Income Tax

Tribunal upholds Assessee's victory, rejects Revenue's appeal, citing lack of evidence.

The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision in favor of the Assessee on all grounds. The Assessee successfully proved the ... Unexplained credits introduced in the garb of unsecured loans - Accommodation entries - Held that:- CIT(A) has rightly held that when the assessee had provided the AO with the latest address of the squared up cash creditor (as the assessee had no such control on them therefore they were unable to produce before the AO and no further enquiries have been done of any kind by the AO) Ld. CIT(A) found that even the basic step i.e. summons or query letter were not issued, to these cash creditor and not an iota of evidence has been collected and brought on record which indicates or prove that the cash credit money was assessee's own money, in such an event, he rightly held that AO is not correct in holding the ₹ 95,00,000 received from 3 corporate entities mentioned above are bogus, sham and they are engaged in providing accommodation entry. - Decided against revenue Addition on on account of earnest money - Held that:- CIT(A) has rightly held that AO was not justified in making addition on account of earnest Money, particularly when the property which was reflected as part of the inventory as on 31.03.2009 and the same is sold in the subsequent year and profit on the same has duly been reflected in and profit and loss account for assessment year 2010-11. Hence the addition made on account of earnest money was rightly deleted. - Decided against revenue Unaccounted cash deposited in bank - Held that:- As during the year the assessee sold 2 of properties, namely Property no. 11, N.K. II Indirapuram (Rs. 75,00,000) and property no. 392, Shakti Khand-III, Indirapuram (Rs.9,50,000). We find that both the property sale are duly been reflected in assessment year 2009-10. The assessee had received the sale consideration of ₹ 9,50,000 in cash and the same was shown as a source of cash being deposited in the bank account. The AO had accepted the sales of ₹ 84,50,000 declared by the assessee, in these circumstances the action of the Ld. CIT(A) in deleting the addition of ₹ 9,50,000 on account of cash deposited in the bank account was a rightful one. - Decided against revenue Addition u/s. 50C(1) - Held that:- As it is an established fact that the assessee is engaged in the real estate business, therefore, the immovable properties are appearing in assessee's books of account as stock-in-trade. Further from the perusal of Circular No. 8 of 2002 which relates to the provisions of Section 50C, it was seen that the provisions of Section 50C are only applicable to those assets which are capital assets and on which capital gain is to be computed. In view of above, in our considered opinion, Ld. CIT(A) has rightly held that since the immovable properties are treated as stock-in-trade accordingly, the provisions of section 50C(1) are not applicable, and the addition made by the AO was rightly deleted by the Ld. CIT(A). Therefore, we find no infirmity in the impugned order passed by the Ld. CIT(A) - Decided against revenue Issues Involved:1. Discharge of onus by the Assessee regarding identity, creditworthiness, and genuineness of corporate entities.2. Appreciation of adverse findings by the Assessing Officer (AO).3. Deletion of addition made under Section 68 for unexplained credits related to share application money.4. Deletion of addition made under Section 68 for unexplained credits related to unsecured loans.5. Deletion of addition made under Section 68 for unexplained earnest money received from two parties.6. Deletion of addition made under Section 68 for unexplained cash deposit in the bank account.7. Deletion of addition made under Section 50C(1) of the Act.Detailed Analysis:Issue 1: Discharge of Onus by the Assessee- The Assessee provided documents such as the Certificate of Incorporation, Company Master Detail, ITR Acknowledgements, Bank Statements, Confirmations, and Balance Sheets to prove the identity, creditworthiness, and genuineness of the corporate entities.- The AO disregarded these evidences, citing reasons like non-existence of companies, sham bank transactions, and non-appearance of principal officers/directors.- The CIT(A) found that the Assessee had discharged its onus by providing substantial documentation and that the AO failed to conduct further verification or collect independent evidence.Issue 2: Appreciation of Adverse Findings by the AO- The AO's adverse findings were based on the assumption that the corporate entities were bogus and engaged in accommodation entries without substantial evidence.- The CIT(A) criticized the AO for not making further inquiries or collecting independent evidence to substantiate the claims.Issue 3: Deletion of Addition under Section 68 for Share Application Money- The CIT(A) held that the Assessee had provided sufficient evidence to prove the identity and creditworthiness of the shareholders.- The AO failed to bring any material evidence to prove that the share application money was the Assessee's own undisclosed income.- The CIT(A) relied on various judicial pronouncements, including those from the Hon'ble Delhi High Court, which stated that once the identity of shareholders is established, the burden shifts to the AO to discredit the documents produced by the Assessee.- The Tribunal upheld the CIT(A)'s decision, noting that the Assessee had properly explained the share application money.Issue 4: Deletion of Addition under Section 68 for Unsecured Loans- The Assessee provided documentation such as certificates of incorporation, ITRs, balance sheets, and confirmations for the three corporate entities from whom unsecured loans were received.- The AO did not issue summons or conduct further inquiries to verify the claims.- The CIT(A) found that the Assessee had discharged its onus and that the AO's failure to conduct further verification meant the addition could not be justified.- The Tribunal upheld the CIT(A)'s decision, noting that the AO had not collected any evidence to prove that the unsecured loans were the Assessee's own money.Issue 5: Deletion of Addition for Unexplained Earnest Money- The Assessee provided confirmation from the party and explained that the property was sold in the subsequent year, with the profit reflected in the accounts.- The CIT(A) found that the addition was unjustified as the property sale was duly recorded.- The Tribunal upheld the CIT(A)'s decision, noting that the AO was not justified in making the addition.Issue 6: Deletion of Addition for Unexplained Cash Deposit- The Assessee explained that the cash deposit was from the sale of a property, which was part of the stock-in-trade.- The CIT(A) verified the property sale details and found the addition unjustified.- The Tribunal upheld the CIT(A)'s decision, noting that the AO had accepted the sales declared by the Assessee.Issue 7: Deletion of Addition under Section 50C(1)- The CIT(A) noted that the Assessee was engaged in the real estate business, and the properties were stock-in-trade, not capital assets.- The provisions of Section 50C(1) apply only to capital assets, not stock-in-trade.- The Tribunal upheld the CIT(A)'s decision, agreeing that the addition under Section 50C(1) was not applicable.Conclusion:The Tribunal dismissed the appeal of the Revenue, upholding the CIT(A)'s order in favor of the Assessee on all grounds. The Assessee successfully demonstrated the identity, creditworthiness, and genuineness of the transactions, and the AO failed to provide substantial evidence to the contrary.