2022 (4) TMI 171 - AT - Income Tax

Tribunal reverses assessment enhancement due to lack of evidence, deletes penalties, partially allows appeal.

The Tribunal reversed the CIT(A)'s enhancement of assessment, citing lack of concrete evidence and proper verification. The Tribunal deleted penalties ... Addition towards amount paid for purchase of property - unexplained money u/s.69A - addition on the basis of loose sheets find in search - basis for additions is search conducted in the case of Shri E.Anandan, husband of the assessee - HELD THAT:- We reject reasons given by the CIT(A) to enhance the assessment on the basis of incriminating materials found during the course of search - explanation of the assessee that advance mentioned in sale agreement between the assessee and Mr. K.Thangavelu was paid by Mr.Ashok Kumar and make over to the assessee is proved beyond doubt with necessary evidences, including confirmation letter from the party - assessee had also proved fact that she had repaid a sum of ₹ 1 crore to Shri Ashok Kumar, out of sale proceeds of property at Chennai by her husband Mr. E.Anandan is also proved beyond doubt which is evidenced from fact that although, the purchaser had paid sale consideration of ₹ 90 lakhs by demand draft / RTGS, but Mr. E.Anandan has withdrawn amount from his bank account which clearly proves that money has been used to make payment to Shri Ashok Kumar. Therefore, we are of the considered view that additions made by the Assessing Officer towards advance payment made to Mr. K.Thangavelu on the basis of sale agreement dated 07.02.2014 is not correct. Addition of ₹ 10 lakhs cash advance claims to have been paid by M/s.Green Home Landscape Pvt Ltd. to Shri Thangavelu on the ground that this amount has gone from undisclosed source of Mrs.Latha. We find that when the agreement clearly shows that payment has been made by M/s.Green Home Landscape Pvt. Ltd., same cannot be attributed to the assessee and thus, we are of the considered view that the learned CIT(A) has erred in making addition in the hands of the assessee. Similarly, CIT(A) has made additions towards entries recorded in some loose sheets on the ground that the assessee has paid cash to Mr. K.Thangavelu for purchase of property. As no additions can be made only on the basis of loose sheets, when the assessee demonstrated with evidence that the property has been purchased for the stated consideration in the agreement of sale and further registered deed executed for transferring title also confirms consideration paid for purchase of property. Therefore, we are of the considered view that enhancement made by the learned CIT(A) on the basis of entries in loose papers cannot be sustained. Hence, we reverse findings of the learned CIT(A) and delete enhancement made by the learned CIT(A). Unexplained cash credits in the bank account of the assessee - explanation of the assessee that these cash deposits were payment made for purchase of property at Vadavalli and thus, when the AO has made addition towards investments in purchase of property, once again addition towards cash deposits found in bank account amounts to double addition - HELD THAT:- We find that except stating that the Assessing Officer has already made additions towards investments made in property, the assessee could not file any documentary evidence to explain cash deposits found in bank account. Further, additions made by the Assessing Officer towards unexplained investments in purchase of property has been deleted by holding that the assessee has explained source for investments out of borrowings from banks, loan from friends and relatives and various other loans from banks. However, with regard to cash deposits found in bank account on various dates, the assessee could not file any satisfactory explanation. Therefore, we are of the considered view that there is no error in the reasons given by the Assessing Officer to make additions towards cash deposits found in the bank account u/s.69A of the Income Tax Act, 1961. Hence, we are inclined to uphold findings of learned CIT(A) and reject ground taken by the assessee. Issues Involved:1. Enhancement of assessment by the CIT(A) without proper justification.2. Validity of the assessment order under section 153C read with section 143(3).3. Evidentiary value of seized materials and their interpretation.4. Opportunity given to the assessee before passing the impugned order.5. Penalty under section 271(1)(c) of the Income Tax Act, 1961.6. Unexplained investments and cash credits.Issue-wise Detailed Analysis:1. Enhancement of Assessment by the CIT(A) Without Proper Justification:The assessee contested the enhancement of assessment made by the CIT(A), arguing that the recomputation of taxable income was unjustified and based on incorrect presumptions. The CIT(A) enhanced the assessment by adding Rs. 1,83,50,000 towards unexplained investments in property, asserting that the agreements and transactions involving Mr. Ashok Kumar were fabricated. However, the Tribunal found that the CIT(A) disbelieved the agreements without proper verification and relied on loose sheets without substantive evidence. The Tribunal concluded that the enhancement was based on assumptions and lacked concrete evidence, thus reversing the CIT(A)'s decision.2. Validity of the Assessment Order Under Section 153C Read with Section 143(3):The assessee claimed that the assessment order was passed out of time and without jurisdiction. However, the Tribunal did not specifically address this issue in detail, focusing instead on the substantive issues of unexplained investments and the enhancement made by the CIT(A).3. Evidentiary Value of Seized Materials and Their Interpretation:The Tribunal scrutinized the seized documents and the CIT(A)'s interpretation of these materials. The CIT(A) had dismissed the agreements involving Mr. Ashok Kumar as make-believe stories and relied on loose sheets to support the enhancement. The Tribunal found that the CIT(A) failed to verify the documents and parties involved, and the reliance on loose sheets was not sufficient to substantiate the enhancement. The Tribunal emphasized that proper verification and concrete evidence were necessary, leading to the deletion of the enhanced amount.4. Opportunity Given to the Assessee Before Passing the Impugned Order:The assessee argued that there was no proper opportunity given before the passing of the impugned order, violating the principles of natural justice. The Tribunal noted that the CIT(A) did not provide adequate opportunity for the assessee to present their case, particularly regarding the verification of agreements and transactions. This lack of opportunity contributed to the Tribunal's decision to reverse the CIT(A)'s enhancement.5. Penalty Under Section 271(1)(c) of the Income Tax Act, 1961:The CIT(A) had imposed a 300% penalty on the assessee based on the enhanced assessment. Since the Tribunal deleted the enhancement made by the CIT(A), the basis for the penalty no longer existed. Consequently, the Tribunal also deleted the penalty imposed under section 271(1)(c).6. Unexplained Investments and Cash Credits:The Tribunal examined the unexplained investments and cash credits in detail. For the assessment year 2014-15, the Tribunal found that the assessee had adequately explained the source of the Rs. 1 crore advance payment made to Mr. K. Thangavelu through Mr. Ashok Kumar. For the assessment year 2015-16, the Tribunal determined that the assessee had satisfactorily explained the source of Rs. 3,13,78,000 out of the total investment of Rs. 4,47,00,000. However, the Tribunal upheld the addition of Rs. 39,51,560 towards unexplained cash credits, as the assessee failed to provide satisfactory evidence for these deposits.Conclusion:The Tribunal allowed the appeals for the assessment year 2014-15, deleting the enhancements and penalties imposed by the CIT(A). For the assessment year 2015-16, the Tribunal partly allowed the appeal, deleting the additions towards unexplained investments but upholding the addition for unexplained cash credits. The Tribunal's decision emphasized the importance of concrete evidence and proper verification in tax assessments.