2022 (1) TMI 477 - AT - Income Tax

Tribunal Upholds CIT(A) Decision on Tax Additions, Avoids Double Taxation

Deputy Commissioner of Income Tax, Central Circle-01, Jaipur Versus Late Smt. Pushpa Goyal

Deputy Commissioner of Income Tax, Central Circle-01, Jaipur Versus Late Smt. Pushpa Goyal - TMI Issues Involved:1. Justification of deleting the addition of Rs. 1,90,08,157/- on account of 'On-money.'2. Justification of deleting the addition of Rs. 3,65,421/- on account of disallowance of indexation cost.3. Classification of shops sold as capital assets instead of stock in trade.4. Relevance of entries found in N Trading cloud data for 'On-money.'5. Impact of Manglam Group owning up the entire entries in the N Trading cloud data before the Hon’ble ITSC.Detailed Analysis:1. Justification of deleting the addition of Rs. 1,90,08,157/- on account of 'On-money':The Revenue challenged the deletion of Rs. 1,90,08,157/- added by the AO based on 'On-money' transactions found in the N Trading cloud data. The AO argued that the data indicated the assessee received 'On-money' on the JEM project. However, the CIT(A) deleted the addition, noting that no document or material was found during the search of the assessee to indicate receipt of 'On-money.' The CIT(A) emphasized that the data was seized from MBDL’s premises, not from the assessee, and MBDL had owned up the data before the Settlement Commission, which had accepted their petition. The Tribunal upheld the CIT(A)’s decision, agreeing that the 'On-money' belonged to MBDL and had already been taxed in their hands, thus preventing double taxation.2. Justification of deleting the addition of Rs. 3,65,421/- on account of disallowance of indexation cost:The Revenue contended that the asset sold was stock in trade, not a capital asset, and thus the addition of Rs. 3,65,421/- on account of disallowance of indexation cost was justified. The CIT(A) disagreed, treating the shops sold as capital assets. The Tribunal supported the CIT(A)’s view, noting that the assessee was a landowner and not involved in the day-to-day operations of the project, thus considering the shops as capital assets.3. Classification of shops sold as capital assets instead of stock in trade:The Revenue argued that the shops sold should be treated as stock in trade. The CIT(A) treated them as capital assets, a stance upheld by the Tribunal. The Tribunal noted that the assessee’s involvement was limited to owning the land, with MBDL handling all development and sales activities. Therefore, the shops were rightly classified as capital assets.4. Relevance of entries found in N Trading cloud data for 'On-money':The AO relied on N Trading cloud data seized from MBDL’s premises to make additions for 'On-money.' The CIT(A) and the Tribunal found this approach flawed, as the data was not seized from the assessee, and MBDL had already owned up and settled the 'On-money' receipts with the Settlement Commission. The Tribunal emphasized that no evidence was found during the search of the assessee to indicate receipt of 'On-money.'5. Impact of Manglam Group owning up the entire entries in the N Trading cloud data before the Hon’ble ITSC:The CIT(A) and the Tribunal gave significant weight to MBDL’s ownership of the N Trading cloud data and their settlement with the ITSC. They noted that the Settlement Commission had accepted MBDL’s petition, which included the 'On-money' receipts. The Tribunal highlighted that taxing the same 'On-money' in the hands of the assessee would result in double taxation, which is not permissible. The Tribunal also referenced a similar case (Sh. Jugal Kishore Garg) where the addition based on the same cloud data was deleted, reinforcing the principle of consistency.Conclusion:The Tribunal dismissed the Revenue’s appeals, affirming the CIT(A)’s decisions to delete the additions. The Tribunal emphasized the lack of direct evidence against the assessee, the ownership and settlement of the 'On-money' by MBDL, and the principle of avoiding double taxation. The findings were consistent with previous Tribunal decisions under similar circumstances.