2022 (5) TMI 944 - AT - Income Tax

Tribunal upholds income from land sale and unregistered business, dismisses cash distribution claim.

Mr. A. Johnkumar Versus The Dy. Commissioner of Income Tax, Central Circle-1 (4), Chennai. And (Vice-Versa)

The Tribunal upheld the addition of Rs. 2.49 Crores as income under 'Other Sources' from the sale of agricultural land, Rs. 2.26 Crores as unaccounted ... Additions towards on money received from sale of land - undisclosed income on account of sale of property - HELD THAT:- Although, the assessee had admitted on money received from sale of land and further, explained cash found during the course of search, out of on money received from sale of property, but the assessee never disclosed consideration received for sale of property in his return of income filed for the relevant assessment year - additional consideration, if any, including on money also partakes the nature of consideration received from sale of property, but such conclusion can be withdrawn only in a case, if assessee disclose on money received from sale of property in his return of income filed for the relevant assessment year. In this case, the assessee never disclosed consideration received for sale of property in his return of income. Further, the assessee had admitted undisclosed income on account of sale of property. Further, although buyer of the property denied having paid on money, but the documents found during the course of search indicate receipt of on money. Therefore, we are of the considered view that explanation of the assessee is that on money received from sale of property partakes the nature of capital receipt which is exempt u/s.2(14)(iii) of the Act, cannot be accepted. Hence, we are inclined to uphold the findings recorded by the AO as well as the Ld.CIT(A) and sustain the additions made towards on money received from sale of property. Additions towards unaccounted income from unregistered chit and finance business - HELD THAT:- As during the course of post search investigation, he could able to explain certain papers and also filed details of loans and advances outstanding as on date of the search at Rs.3.14 Crs. and also agreed to disclose additional income of Rs.3.2 Crs. for the AY 2017-18. However, in the return of income filed for the AY 2017-18, the assessee has offered income from chit and commission interest, income from money lending business at Rs.93,10,180/- and claimed that balance amount has been reconciled with books of accounts maintained for chit and finance business. CIT(A) has allowed relief to the assessee to the extent of Rs.93,10,180/- out of total addition made by the AO at Rs.3.2 Crs. The balance amount of Rs.2,26,89,820/- remains unexplained. Even before us, the assessee neither explained the loose sheet found during the course of search, which contain chit and finance business transactions nor reconcile total loans and advances outstanding as on date, even though, he himself quantified outstanding loans and advances at Rs.3.14 Crs. Therefore, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to sustain additions made by the AO towards undisclosed income from chit and finance business amounting to Rs.2,26,89,820/-. Hence, we are inclined to uphold the findings of the Ld.CIT(A) and reject the ground taken by the assessee. Unexplained expenditure u/s.69C - HELD THAT:- AO has made addition as ‘unexplained expenditure’ u/s.69C on the basis of admission of the assessee. Except this, no other evidence was brought on record to substantiate the findings of the AO to make addition of Rs.15 lakhs u/s.69C of the Act. Therefore, on this count itself, the additions made by the AO towards ‘unexplained expenditure‘ on account of gift/assistance given to beneficiaries, cannot be sustained. Be that as it may. The assessee had admitted undisclosed income of Rs.3.2 Crs. from chit and finance business and out of said business income, the assessee can easily explain so called Rs.15 lakhs gift/assistance given to beneficiaries. Therefore, even if addition is made on account of gift/assistance given to beneficiaries, the AO as well as the Ld.CIT(A) ought to have telescoped said expenditure out of additional income offered by the assessee from chit and finance business. Hence, we direct the AO to telescope ‘unexplained expenditure’ incurred towards gift/assistance given to beneficiaries out of undisclosed income offered from chit and finance business and delete additions made u/s.69C of the Act. Expenditure towards alleged distribution of cash for votes - AO has erred in making additions towards unexplained expenditure u/s.69C of the Act, towards alleged distribution of cash for votes. The Ld.CIT(A) without appreciating the fact simply sustained additions made by the AO and hence, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the additions made towards unexplained expenditure u/s.69C of the Act, amounting to Rs.17 Crs. towards alleged distribution of cash for votes. Issues Involved:1. Addition of Rs. 2.49 Crores as income under the head 'other sources' from the sale of agricultural land.2. Addition of Rs. 2.26 Crores as unaccounted income from unregistered chit and finance business.3. Addition of Rs. 15 Lakhs as unexplained expenditure for gifts to beneficiaries.4. Addition of Rs. 17 Crores as unexplained expenditure under Section 69C for alleged cash distribution to voters.Issue-Wise Detailed Analysis:1. Addition of Rs. 2.49 Crores as Income under 'Other Sources' from Sale of Agricultural Land:The assessee contended that the land sold was agricultural land, exempt under Section 2(14)(iii) of the Income Tax Act, and thus, any 'on money' received should also be exempt. The Tribunal noted that the assessee admitted to receiving on money from the sale of the land. The incriminating material found during the search, including loose sheets and statements from the buyer, confirmed the receipt of on money. Despite the assessee's claim that the land sale proceeds were exempt, the Tribunal upheld the addition, emphasizing that the assessee did not disclose the consideration received in the return of income. The Tribunal concluded that the explanation that on money received from the sale of agricultural land is exempt cannot be accepted, thereby sustaining the addition.2. Addition of Rs. 2.26 Crores as Unaccounted Income from Unregistered Chit and Finance Business:During the search, loose sheets indicating unregistered chit and finance business were found. The assessee admitted to carrying out such business and agreed to disclose additional income. However, the return filed did not reflect the full undisclosed income. The Tribunal noted that the assessee failed to explain the seized materials and reconcile the outstanding loans and advances. The Ld.CIT(A) allowed partial relief but sustained the addition of Rs. 2.26 Crores. The Tribunal upheld this decision, noting that the assessee did not provide sufficient evidence to counter the findings.3. Addition of Rs. 15 Lakhs as Unexplained Expenditure for Gifts to Beneficiaries:The search revealed photo identity cards issued by the assessee's trust, indicating gifts to beneficiaries. The assessee admitted to offering Rs. 15 Lakhs as additional income. The Tribunal found no corroborative evidence to support the AO's addition of Rs. 15 Lakhs under Section 69C. However, since the assessee admitted undisclosed income from chit and finance business, the Tribunal directed the AO to telescope the unexplained expenditure from the additional income offered, thereby deleting the addition.4. Addition of Rs. 17 Crores as Unexplained Expenditure under Section 69C for Alleged Cash Distribution to Voters:The AO made an addition based on seized photo identity cards and WhatsApp messages, alleging cash distribution to voters. The Tribunal found that the AO's conclusions were based on suspicion and lacked corroborative evidence. The WhatsApp messages were deemed insufficient to substantiate the claim of cash distribution. The Tribunal noted that the election was monitored by the Election Commission, and no irregularities were reported. The Tribunal concluded that the AO's findings were speculative and directed the deletion of the addition.Conclusion:The Tribunal partly allowed the assessee's appeal, deleting the additions related to unexplained expenditure for gifts and alleged cash distribution to voters. The Revenue's appeal was dismissed, as the protective addition of Rs. 17 Crores in the hands of the assessee was unsustainable following the deletion of the substantive addition in the hands of Mr. A. Johnkumar.