2021 (3) TMI 1194 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions, emphasizing need for corroborative evidence

ACIT (Central) -II Bhopal Versus Shri Nitin Agrawal, M/s S.V. Infra Developers, Bhopal

The Tribunal dismissed all grounds of the Revenue's appeals, upholding the CIT(A)'s decisions to delete additions due to lack of corroborative evidence ... Assessment u/s 153A - Addition on account of admission of additional income u/s 132(4) - addition made by the Ld. A.O based on the statement given u/s 132(4) of the Act and subsequently deleted by the first appellate authority - HELD THAT:- As during the course of assessment proceedings Ld. A.O did not refer the case to the Departmental Valuation Officer nor made any efforts to arrive on the variation in the book figures and value estimated at the project site and resorted to make the addition purely on the basis of statement. Ld. A.O also failed to take note of the fact that in the case of M/s S.V. Infra Developers till the time of search there was not a single bunglow that was completed for sale therefore no sale or any possession of house is handed over to any customer. The volume of the material at site was also too small which cannot justify the undisclosed income of ₹ 5 crores. Ld. CIT(A) after appreciating the above stated facts concluded that the addition made was purely on the basis of the statement given u/s 132(4) of the Act and deserves to be deleted. Since the impugned addition is purely made on the basis of statement u/s 132(4) of the Act without establishing any nexus with incriminating material found during the course of search, the finding of Ld. CIT(A) deleting the addition in the case of Shri Nitin Agrawal and M/s S.V. Infra Developers needs no interference and the same is confirmed. Unexplained cash - panchnama cash was found from the residence of the assessee and from the office premises - CIT-A deleted the addition - HELD THAT:- Shri Nitin Agrawal is one of the key person controlling the various business. The department has taken the basis of statement of Shri Nitin Agrawal for making various additions which interalia included surrender on behalf of various business concerns so this is an undisputed fact that though there are different entities running under the business group but they all are inter connected and controlled by some common persons of which one is Shri Nitin Agrawal. In the reconciliation statement cash balance as per the books is stated at ₹ 87,82,341/-. Revenue has not confronted this fact. The assessee has stated that the cash in hand found during the course of search from his residence was part of the cash in hand of the group. There is no contrary finding by Ld. A.O to the figures narrated in the reconciliation statement about the cash balance in books of business concern named therein. Under these given facts where the cash in hand available in books is much more than the cash found during the course of search and the same has been rightly explained in the reconciliation statement, we find no justification in the addition made by Ld. A.O for unexplained cash and Ld. CIT(A) has rightly deleted the addition and the finding is thus confirmed. Unexplained jewellery - jewellery was found/ seized at the residence and locker of the assessee as per the panchnama drawn during the course of search action - HELD THAT:- From findings of Ld. CIT(A) we observe that he has rightly considered the wealth tax return submitted by the assessee during year 1991-92 and 1992-93 and also considered the Instruction No.1916 of CBDT dated 11.5.1994 and after referring to settled judicial precedents has confirmed the addition partly. Since the revenue authorities has failed to bring any other material contrary to the finding given by Ld. CIT(A) and considering the fact that the assessee has filed wealth tax and assessed as well as considering the limit of jewellery of 500 grms for female and 100 grams for male member provided in CBDT Instruction No.1916 dated 11.5.1994, we find no reason to interfere in the finding of Ld. CIT(A) duly supported by judicial precedence deleting the addition - Ground No.3 of the Revenue’s appeal dismissed. Unexplained advance to Shri Lilwani family - HELD THAT:- As there was sufficient cash in hand with the assessee and its group concerns, secondly Ld. A.O has not provided opportunity of cross examination of the assessee with Shri Dinesh Lilwani before relying on the statement of Shri Dinesh Lilwani, thirdly Ld. A.O over looked the statements of Shri P. Raju and Shri Nitin Agrawal and gave only credit to the statement of Shri Dinesh Lilwani and fourthly the Ld.A.O failed to consider the fact that the case of the appellant for advance of loan to Shri Dinesh Lilwani is still pending in the court.Under these given facts, in our considered view Ld. A.O was not justified in making addition for unexplained advances. Branded watches seized in search - HELD THAT:- A.O has not taken any step to bring on record the valuation of the watches found during the course of search which thus makes the addition merely on the estimated basis and same therefore have been rightly deleted by Ld. CIT(A) relying on settled judicial precedents. Addition on account of foreign travel expenses - various documents were found about the foreign travel carried out by the assessee and his wife - HELD THAT:- As the assessee who is into the business of construction has conducted various foreign visits and expenses of the same were also debited in the books of accounts. Ld. A.O estimated the undisclosed expenditure at ₹ 2 lakh. We are however of the view that Ld. CIT(A) being fair to both the parties has rightly considered the issue and partly deleted the addition at ₹ 1 lakh which thus do not call for any interference. Issues Involved:1. Addition based on admission of additional income under section 132(4) of the Income Tax Act, 1961.2. Addition on account of unexplained cash.3. Addition on account of unexplained jewelry.4. Addition on account of unexplained advances.5. Addition on account of unexplained investment in watches.6. Addition on account of foreign travel expenses.Issue-wise Detailed Analysis:1. Addition Based on Admission of Additional Income Under Section 132(4):The Revenue challenged the deletion of Rs. 5 crores each in the hands of Shri Nitin Agrawal and M/s S.V. Infra Developers, which was based on the statement given under section 132(4) during the search. The Tribunal noted that the addition was not corroborated by any incriminating material found during the search. The Tribunal cited previous judgments, emphasizing that additions cannot be sustained merely on the basis of statements without corroborative evidence. The Tribunal upheld the CIT(A)'s decision to delete these additions, as the Revenue failed to provide any evidence linking the statements to incriminating material.2. Addition on Account of Unexplained Cash:The Revenue contested the deletion of Rs. 26,42,910/- found at the residence of Shri Nitin Agrawal. The Tribunal observed that the cash balance as per the books of the group concerns was Rs. 87,82,341/-, which was more than the cash found during the search. The CIT(A) accepted the reconciliation statement provided by the assessee and deleted the addition. The Tribunal upheld this decision, noting that the Revenue did not challenge the cash balance figures presented by the assessee.3. Addition on Account of Unexplained Jewelry:The Revenue challenged the deletion of Rs. 24,88,216/- for unexplained jewelry. The Tribunal noted that the jewelry found was within the limits specified by CBDT Instruction No. 1916, which considers 500 grams for a married woman and 100 grams for a male member. The CIT(A) also considered the wealth tax returns filed by the assessee's wife, showing 735 grams of gold jewelry. The Tribunal upheld the CIT(A)'s decision to delete the addition, as the jewelry was reasonably explained.4. Addition on Account of Unexplained Advances:The Revenue contested the deletion of Rs. 50,00,000/- for unexplained advances to Shri Dinesh Lilwani. The Tribunal noted that the assessee provided sufficient cash balance in the books to cover the advance and that no opportunity for cross-examination of Shri Dinesh Lilwani was provided. The CIT(A) considered the pending court case and the statements of Shri P. Raju and Shri Nitin Agrawal, concluding that the addition was not justified. The Tribunal upheld this decision.5. Addition on Account of Unexplained Investment in Watches:The Revenue challenged the deletion of Rs. 10,00,000/- for unexplained investment in watches. The Tribunal noted that the Ld. A.O made the addition based on an estimate without referring the matter to an expert for valuation. The CIT(A) deleted the addition, stating that it was based on guesswork without any evidence. The Tribunal upheld this decision, emphasizing that additions cannot be made on mere suspicion.6. Addition on Account of Foreign Travel Expenses:The Revenue contested the deletion of Rs. 1,00,000/- for foreign travel expenses. The Tribunal noted that the assessee had conducted various foreign visits, and the expenses were recorded in the books. The CIT(A) sustained the addition at Rs. 1,00,000/- instead of Rs. 2,00,000/-, considering the latter to be on the higher side. The Tribunal upheld this decision, finding it fair and reasonable.Conclusion:The Tribunal dismissed all grounds of the Revenue's appeals in both cases, upholding the CIT(A)'s decisions to delete the additions based on the lack of corroborative evidence and adherence to legal precedents. The Tribunal emphasized the necessity of corroborative evidence to sustain additions based on statements made under section 132(4) of the Income Tax Act.