2021 (3) TMI 1000 - AT - Income Tax

Tribunal decision: Assessments revised, additions deleted, income recalculated.

The Tribunal partially allowed the assessee's appeals and dismissed the Revenue's appeal. It directed the Assessing Officer to delete additions related to ... Under valuation of property - Addition is based on the difference between the value declared by the assessee in their Books of Accounts as compared to DVO’s Report - HELD THAT:- The Valuation Report was made after the long gap of period after the purchase made by the assessee. In other words, the Valuation Report was made in F.Y. 2016-17 contrary to the purchase of property in the F.Y. 2013-14 and F.Y. 2015-16. During these periods, there is a steep rise in the value of the immovable property and we cannot consider the Valuation Report of the DVO is foolproof in which the inflation cost also has to take into account. Immovable property registered with the State Authorities wherein they accepted the valuation declared by the assessee with regard to various properties and not disputed by the Sub-Registrar of the concerned State Govt. Office. In such circumstances, the Assessing Officer only on the basis of valuation mentioned in the DVO Report cannot make addition when such difference is less than 15% as compared to the valuation declared in the Books of Accounts. On this count, we are inclined to delete the addition in all these assessment years. This ground of appeal of the assesses is allowed. Estimation of income on undisclosed turnover at 5% - HELD THAT:- As gone through the order of the Tribunal in the case of M.A. Siddique Vs. DCIT [2020 (8) TMI 835 - ITAT BANGALORE] wherein the Tribunal considered the business of Supari and observed that in the case of unaccounted sales no bill is issued and therefore no customer will pay taxes and levies which will result into higher profit to the seller. The Tribunal adopted the profit rate of 2% in the case of Supari business. Following the above decision of co-ordinate bench of this Tribunal, we are inclined to hold that the Assessing Officer shall adopt the net profit of 2% on undisclosed turnover of the assessee in all these assessment years. Non-giving of set off of income declared by the assessee in the statement recorded u/s. 132(4) - HELD THAT:- Assessing Officer assessed the undisclosed income in addition to the income voluntarily declared by these assesses in the statement recorded u/s. 132(4) - Assessing Officer made independent addition based on the seized material found during the course of survey action, there cannot be income addition on account of voluntary disclosure made by the assesses. Hence, in our opinion, it is appropriate to set off of income declared by the assessee in the statement recorded u/s. 132(4) of the Act out of undisclosed income computed by the Assessing Officer. Accordingly, we direct the Assessing Officer to recompute the income after overlooking the income declared by the assessee in the statement recorded u/s.132(4) of the Act. Otherwise it amounts to double addition for the same lapse found in the Books of Accounts of the assesses. It is pertinent to mention the CBDT Circular No. 14(XL-35) of 1955, dated 11.4.1955 as per which the lower authorities should have guided the assessee as to the correct proposition of the law regarding taxability of capital gain. As the addition shall be confined to the incriminating material found during the course of search action. Accordingly, we direct the Assessing Officer not to consider the additions made on the basis of statement recorded u/s. 132(4) of the Act. This ground of appeals by the assesses is allowed. Unexplained income - CIT(Appeals) sustained the addition at 5% of this amount - HELD THAT:- Any unexplained deposits in the Bank accounts, it should be considered as business receipts and income at 2% has to be assessed as undisclosed income of the assessee by placing reliance on the judgement of M.A. Siddique Vs. DCIT [2020 (8) TMI 835 - ITAT BANGALORE]. Accordingly, we direct the Assessing Officer to consider only 2% of this cash deposit of ₹ 2,61,00,100 as undisclosed income of the assessee. Levy of interest u/s. 234A, 234B & 234C - HELD THAT:- Once a recomputation in the assessment order u/s. 153A of the Act is done, the interest chargeable u/s. 234A would have to be reckoned from the date of determination of income u/s. 143(1) r.w.s. 153A of the Act to the date of recomputation of income u/s.153A r.w.s.143(3) of the Act. This position is in accordance with the provisions s stated in Section 234A(3) of the Act. Therefore interest u/s. 234A is chargeable from the date of expiry of the Notice period given u/s. 153A of the Act to the date of completing the assessment u/s. 153A r.w.s. 143(3) of the Act.Accordingly, we direct the Assessing Officer to recomputed the interest u/s. 234A of the Act. The interest u/s. 234B is to be leviable from the date of determination of income u/s. 143(1) r.w.s. ;139, r.w.s. 153A(1)(a) to the date of assessment order u/s. 153A, r.w.s. 143(3) of the Act. The interest u/s. 234B is to be levied only on the additional tax levied on the enhanced income determined u/s. 153A, r.w.s.143 of the Act and therefore the period of charge should be from the date of determination of income u/s. 143(3) r.w.s. 153A to the determination of increased total income u/s. 153A, r.w.s. 143(3) of the Act. We direct accordingly to the Assessing Officer to recompute the interest u/s. 234B of the Act. Levy of interest u/s. 234C of the Act, no serious argument has been made by the ld. AR on this issue. Addition made towards rental receipt - seized material suggests that the assessee is jointly owning property with his sister and there was a receipt of rent of ₹ 9,500 per month which is assessee's share after deduction u/s. 24 - HELD THAT:- Admittedly in this case the Assessing Officer has not examined the tenants. It is also brought to our notice that it was unoccupied in the Assessment Year under consideration and no income derived. Hence in our opinion, the CIT(Appeals) justified in deleting the additions made by the Assessing Officer. The order of the CIT(Appeals) on this issue is confirmed. This ground of appeal of Revenue on this issue is dismissed. Addition on drawings - assessee has claimed foreign education expenses incurred by his son and pleaded that it has made sufficient drawings and also submitted letter from one Mr. Abdul Farveez who is an NRI stating that he has met the education expenses of assessee's son - deletion by CIT(Appeals) on account of drawings without calling for Remand Report from the Assessing Officer - HELD THAT:- DR is not able to counter the findings of the CIT(Appeals) that the assessee has furnished confirmation letter from NRI sponsored the education expenses of Mr. Abdul Farvez, the assessee's son. In such circumstances, the CIT(Appeals) justified in deleting the addition made by the Assessing Officer on account of low drawings. The order of the CIT(Appeals) on this issue is confirmed. This ground of appeal of the Revenue is dismissed. Issues Involved:1. Addition due to under-valuation of property.2. Estimation of income on undisclosed turnover.3. Non-giving of set-off of income declared in statements recorded under section 132(4) of the Act.4. Cash deposits in bank accounts.5. Levy of interest under sections 234A, 234B, and 234C of the Act.6. Deletion of addition towards rental receipts.7. Deletion of addition on account of drawings without calling for a remand report from the Assessing Officer.Detailed Analysis:1. Addition Due to Under-Valuation of Property:The first common ground in the assessee's appeals pertains to the addition due to under-valuation of property. The Assessing Officer (AO) made additions based on the difference between the value declared by the assessee in their books of accounts and the valuation report by the Registered Valuer. The AO computed the differences for the assessment years 2014-15 and 2016-17 as Rs. 7,92,640 and Rs. 10,63,595 respectively. The CIT(Appeals) upheld these additions, observing that the assessee failed to provide sufficient evidence. However, the Tribunal found that the difference in valuation was less than 15%, which is generally considered acceptable, citing judgments from the Patna High Court and ITAT. Consequently, the Tribunal deleted the additions for all assessment years concerned.2. Estimation of Income on Undisclosed Turnover:The second issue involves the estimation of income on undisclosed turnover. The CIT(Appeals) estimated the income at 5%, which the assessee argued was too high, suggesting it should be around 2%. The Tribunal referred to a previous ITAT decision in the case of M.A. Siddique Vs. DCIT, which considered a 2% net profit rate for the Supari business. Following this precedent, the Tribunal directed the AO to adopt a 2% net profit rate on the undisclosed turnover for all relevant assessment years.3. Non-Giving of Set-Off of Income Declared in Statements Recorded under Section 132(4):The third issue is the non-giving of set-off of income declared by the assessee in statements recorded under section 132(4) of the Act. The AO made additions based on seized material and the voluntary disclosure made by the assessee. The Tribunal held that the AO should not make additions based on voluntary disclosure if independent additions are made based on seized material. The Tribunal directed the AO to recompute the income after excluding the voluntary disclosure to avoid double addition.4. Cash Deposits in Bank Accounts:The fourth issue pertains to cash deposits in bank accounts. The AO made an addition of Rs. 2,61,00,100 as unexplained income, which the CIT(Appeals) reduced to 5% of this amount. The Tribunal, referring to its earlier decision, directed the AO to consider only 2% of the cash deposits as undisclosed income, aligning with the judgment in the case of M.A. Siddique Vs. DCIT.5. Levy of Interest under Sections 234A, 234B, and 234C:The fifth issue involves the levy of interest under sections 234A, 234B, and 234C of the Act. The Tribunal referred to the ITAT Chennai Bench's decision in Dr. V. Jayakumar & Others Vs. ACIT, which clarified the computation of interest under these sections. The Tribunal directed the AO to recompute the interest as per the provisions of sections 234A(3) and 234B(3), considering the return filed under section 153A as a return filed under section 139.6. Deletion of Addition Towards Rental Receipts:The sixth issue concerns the deletion of the addition towards rental receipts. The AO added Rs. 1,05,000 as rental income based on seized material, which the CIT(Appeals) deleted, observing that the property was unoccupied, and the AO did not examine any tenants. The Tribunal upheld the CIT(Appeals)' decision, confirming that the property was unoccupied during the assessment year and no income was derived.7. Deletion of Addition on Account of Drawings Without Calling for a Remand Report:The seventh issue is the deletion of addition on account of drawings without calling for a remand report from the AO. The AO made an addition of Rs. 11,87,232 under section 69C for foreign education expenses of the assessee's son, which the CIT(Appeals) deleted based on a confirmation letter from an NRI sponsor. The Tribunal upheld the CIT(Appeals)' decision, noting that the AO did not counter the confirmation letter's veracity.Conclusion:In conclusion, the Tribunal allowed the assessee's appeals partly and dismissed the Revenue's appeal. The Tribunal provided detailed directions for the AO to follow, ensuring that the additions and interest computations align with legal precedents and statutory provisions.