2018 (10) TMI 1625 - AT - Income Tax

Tribunal remands unsecured loans, election expenses, land investment issues for fresh review

The Tribunal remanded issues of unsecured loans, unexplained election expenditure, unexplained investment in land, and unexplained investment in Fixed ... Assessment u/s.153A - Addition of unsecured loans u/s.68 - Held that:- It is the claim of the assessee that the transactions entered into by such names of persons can be partly genuine when it comes to “unsecured loans” and partly bogus when it comes to “investment in shares”. This aspect was not properly examined by the CIT(A) applying the strict tests while adjudicating the issue and while granting part relief to the assessee. This is the case of Revenue, when it comes to the unsecured loans, that the relief was liberally granted by the CIT(A) without scrutinizing the loan transactions properly. As examined the documentation filed by the assessee with regard to the correctness of the transactions of loan creditors. We find “all is not well” with the documentation qua the creditworthiness, signatures on the confirmations, PANs etc. It is not justified as to why the creditors failed to give their signatures on the confirmation letters. It is the prayer of both the authorities before us that this entire issue may be remanded to the file of AO for want of one more round of adjudication at the level of the assessing authorities - entire issue of unsecured loans raised in all the appeals is required to be remanded to the file of AO. Addition on account of agricultural income - Held that:- Considering the adhocism involved in this matter, we find the average of all the above comes very close to the decision of 65% as held by the CIT(A) in his order. Therefore, we are of the opinion that the decision of CIT(A) is appropriate and it does not call for any interference. Accordingly, the relevant grounds raised by the assessee are dismissed. Unexplained expenditure on account of Elections - Held that:- The matter stands remanded to the file of AO for examination of the facts and for want of a fresh order on this issue. AO is directed to decide the issue in the light of the seized papers on one side and the order of ITSC, disclosures made by the family members, on the other side giving effect to the same after hearing the assessee. AO shall note that order of settlement of ITSC is binding on the Income-tax authorities and not on the Tribunal. With these directions, this entire issue of unexplained expenditure on elections stands remanded to the file of AO for fresh adjudication and for passing a speaking order. Unexplained investment in land - as admitted that the assessee paid ₹ 10 lakhs as loan to Srusti Sangam and the same remained unpaid - Held that:- For allowing the bad debt, there is need for fulfilling certain conditions by the assessee. It has to be examined if the assessee is a financier and is regularly engaged in the business of money lending/financing activities. This aspect was not examined by the lower authorities before rejecting the claim of the assessee. There is also need for examining the debtor and the reasons for not returning the said payment of ₹ 10 lakhs. Therefore, considering the peculiarity of these facts, we are of the opinion that this issue should also be remanded to the file of AO with a direction to examine the status of the assessee if he is engaged in the business of money lending and circumstances on the debtor for not returning the amount to the lender. Unexplained investment in FDRs - Held that:- We find the source of income for making the FDs worth of ₹ 2,30,970/- is the core issue under litigation. It is the case of the assessee that the source for the same is the proceeds received by the assessee on maturity of the earlier FDs. There is need for furnishing the cash flow of the matured FDs which form part of the new FDs of ₹ 2,30,970/-. It is an admitted fact before us that the assessee offered only an amount of ₹ 79,771/- as additional income for taxation and not the entire addition of ₹ 2,30,970/-. However, Ld. AR firmly submitted that the entire FDs of ₹ 2,30,970/- is explainable if time is granted before the AO. In our view, this matter needs examination in the light of the details of the cash flow. - Appeals of the assessee are partly allowed for statistical purposes. Issues Involved:1. Addition of unsecured loans under Section 68 of the Income Tax Act.2. Addition on account of agricultural income.3. Addition of unexplained election expenditure.4. Unexplained investment in land.5. Unexplained investment in Fixed Deposit Receipts (FDRs).Detailed Analysis:1. Addition of Unsecured Loans under Section 68 of the Income Tax Act:The issue pertains to the assessment years (AYs) 2008-09 to 2010-11. The Assessing Officer (AO) added various amounts as unexplained loans due to the assessee's failure to prove the genuineness and creditworthiness of the creditors. The CIT(A) granted partial relief, confirming some additions while deleting others. The Tribunal found inconsistencies in the documentation and creditworthiness of the creditors and decided to remand the issue back to the AO for a fresh adjudication.2. Addition on Account of Agricultural Income:This issue is relevant for AYs 2008-09 to 2010-11. The AO determined the net agricultural income at 40% of the gross agricultural income, while the CIT(A) increased this to 65%. The Tribunal upheld the CIT(A)'s decision, considering it reasonable given the adhocism involved.3. Addition of Unexplained Election Expenditure:The AO made additions for AYs 2007-08 and 2010-11 based on seized documents indicating unaccounted election expenses. The CIT(A) deleted these additions, noting that the assessee had already offered additional income before the Income Tax Settlement Commission (ITSC) covering these expenses. The Tribunal remanded the issue back to the AO for a fresh examination, directing the AO to consider the ITSC's order and the disclosures made by the assessee.4. Unexplained Investment in Land:For AY 2007-08, the AO added Rs. 10 lakhs as unexplained investment based on a seized receipt. The CIT(A) confirmed this addition, rejecting the assessee's claim that the amount was a bad debt. The Tribunal remanded the issue back to the AO to examine whether the assessee was engaged in money lending and the circumstances under which the amount became irrecoverable.5. Unexplained Investment in Fixed Deposit Receipts (FDRs):For AY 2007-08, the AO added Rs. 2,30,970 as unexplained investment in FDRs. The CIT(A) confirmed the addition, noting the lack of cash flow statements to substantiate the source of the FDRs. The Tribunal remanded the issue back to the AO, directing to examine the cash flow statements and the source of funds for the FDRs.Conclusion:The Tribunal remanded the issues of unsecured loans, unexplained election expenditure, unexplained investment in land, and unexplained investment in FDRs back to the AO for fresh adjudication. The addition on account of agricultural income was upheld as determined by the CIT(A). Both the assessee's and the Revenue's appeals were allowed for statistical purposes, requiring further examination by the AO.