2022 (5) TMI 1142 - AT - Income Tax

Tribunal dismisses Revenue's appeal on unexplained investment, upholds rental income additions, remands bank deposit for verification.

Smt. Mahesh Chaudhari Versus The Income Tax Officer (Central - 1) Nashik, Shri Girish Bhagwat Chaudhari (LH of Late Bhagwat N. Chaudhary) Versus The Income Tax Officer (Central - 1) Nashik And The Income Tax Offier-1 (1) Jalgaon Versus Late Shri Bhagwat N. Chaudhary Through Legal Heirs, Mr. Asha B. Chaudhari (Wife), Mr. Girish B. Chaudhari (Son), Mr. Mahesh B, Chaudhari (Son)

The Tribunal dismissed the Revenue's appeal regarding the unexplained investment addition of Rs. 7,25,00,000/-. The issue of unexplained bank deposit ... Unexplained investment - addition based on incriminating material found and seized during the course of search - presumption of correctness under Section 292C - whether the seized document herein satisfies the foregoing presumption or the same stands rebutted? - HELD THAT:- We note from the case file that all the corresponding entries have been made on a pad of the Maharashtra State Electricity Transmission Company Ltd. We wish to observe here that this company has nothing to do with any sale and purchase of a moveable or immoveable property concerning the assessee at all. The very factual position continues even in the entries forming part of seized documents wherein all what is given is total cost of Rs.725.00 lakhs including cheque of Rs.400 lakhs and cash component of Rs.325 lakhs; respectively. There is not even a single mention of any property or the date of any cheque payment made from the assessees’. All these clinching facts lead us to the conclusion in assessee’s favour and against the department that the statutory presumption of correctness under Section 229C itself stands rebutted since the learned Assessing Officer had made the impugned addition based on a “dumb” document which does not reveal any actual payment at all with dates as well as the assets details involving the taxpayer. We accordingly find no reason to interfere with the learned CIT(A)’s detailed discussion deleting the impugned addition. The Revenue’s instant substantive grounds fails therefore. Unexplained bank deposit - HELD THAT:- As we note from a perusal of the case file that this tribunal’s coordinate bench decision in Revenue’s identical appeal [2022 (3) TMI 1377 - ITAT PUNE] wherein restored the very issue back to the Assessing Officer to verify the sanctity and correctness of the Bank A/c belonging to the assessee and examine whether the funds deposits in the bank account of the HDFC Bank, whether they were from this account or not and re-adjudicate this issue in totality as per law. Deemed dividend under Section 2(22)(e) - addition only qua the peak amount - Whether addition should be restricted to the peak amount of the loans given during the year? - HELD THAT:- Deeming fiction of dividend under Section 2(22)(e) comes to play regarding each and every sum received by the concerned assessee as per the hon’ble jurisdictional high court’s decision in CIT vs. P.K. Badiani [1970 (2) TMI 3 - BOMBAY HIGH COURT] Coupled with this the CIT(A) has also taken note of decision in Tarulata Shyam [1977 (4) TMI 3 - SUPREME COURT] that even a repayment does not alter the status of deemed dividend under Section 2(22)(e) of the Act. We thus hold in this factual position that the learned lower authorities have rightly made the impugned addition of Section 2(22)(e) deemed dividend in assessee’s hands. The foregoing twin decisions coming from the learned coordinate bench also do not rescue the assessee since the facts therein indicated both deemed dividends as well as routine trading transactions wherein it was held that the impugned addition ought to be restricted qua the former component only which is not the case before us. We accordingly reject the assessee’s instant sole substantive ground Issues Involved:1. Unexplained investment addition of Rs. 7,25,00,000/-.2. Unexplained bank deposit addition of Rs. 1,66,00,000/-.3. Addition on account of deemed rental income.4. Addition on account of undisclosed rental income.5. Addition on account of deemed dividend.6. Unexplained cash deposit addition of Rs. 25,89,356/-.Detailed Analysis:1. Unexplained Investment Addition of Rs. 7,25,00,000/-The Revenue's appeal sought to reverse the CIT(A)'s deletion of an addition of Rs. 7,25,00,000/- made by the Assessing Officer based on incriminating material found and seized during a search. The CIT(A) had found that the notings on the seized document were related to a proposed transaction that did not materialize. The document did not contain any specific details about the property, parties involved, or actual payments. The Tribunal upheld the CIT(A)'s decision, stating that the seized document was a 'dumb' document and did not satisfy the presumption of correctness under Section 292C of the Act. Therefore, the addition was deleted.2. Unexplained Bank Deposit Addition of Rs. 1,66,00,000/-The Tribunal referred to a coordinate bench decision in a similar case and restored the issue back to the Assessing Officer for verification. The CIT(A) had previously accepted the assessee's contention that the deposits were transferred from another bank account. However, the Tribunal found that the CIT(A) had not given the Assessing Officer an opportunity to verify this claim. The issue was remanded for factual verification of the bank account details.3. Addition on Account of Deemed Rental IncomeThe assessee's appeal contested the CIT(A)'s confirmation of an addition of Rs. 3,09,357/- on account of deemed rental income under Section 23(4) of the Act. The Tribunal noted that the assessee did not press this ground during the hearing. Therefore, the addition was upheld in favor of the Revenue.4. Addition on Account of Undisclosed Rental IncomeThe assessee also contested an addition of Rs. 5,229/- on account of undisclosed rental income. This ground was similarly not pressed during the hearing, and the addition was upheld.5. Addition on Account of Deemed DividendThe assessee challenged the addition of Rs. 1,06,00,000/- as deemed dividend under Section 2(22)(e) of the Act. The Tribunal upheld the CIT(A)'s decision, stating that the deeming fiction of dividend applies to each sum received by the assessee. The Tribunal referenced the jurisdictional High Court's decision in CIT vs. P.K. Badiani and the Supreme Court's decision in Tarulata Shyam vs. CIT, which support the view that even repayment does not alter the status of deemed dividend. The addition was thus confirmed.6. Unexplained Cash Deposit Addition of Rs. 25,89,356/-The Tribunal noted that the CIT(A) had allowed the assessee's corresponding source of deposits for statistical purposes, which is not permissible after the amendment in Section 251(1)(a) vide Finance Act 2001. The issue was remanded back to the Assessing Officer for fresh verification of the details of credit and debit entries provided by the assessee.Conclusion:- The Revenue's appeal regarding the unexplained investment addition of Rs. 7,25,00,000/- was dismissed.- The issue of unexplained bank deposit addition of Rs. 1,66,00,000/- was remanded back to the Assessing Officer for verification.- The additions on account of deemed rental income and undisclosed rental income were upheld.- The addition on account of deemed dividend was confirmed.- The issue of unexplained cash deposit addition of Rs. 25,89,356/- was remanded back to the Assessing Officer for verification.Order pronounced in the open court on 3rd May, 2022.