2025 (4) TMI 32 - AT - Income Tax

ITAT upholds most deletions including unaccounted payments, cash seizure, agricultural land sale profits, and jewellery additions per CBDT guidelines

The ITAT AGRA upheld most CIT(A) deletions and dismissed revenue appeals. The tribunal deleted additions for unaccounted payments based on loose papers ... Addition of unaccounted payments and investments - HELD THAT:- The assessee honored his statement by incorporating undisclosed income found recorded in various incriminating material / loose papers for taxation and offered the same to tax. Further, upon perusal of LPS it could be seen that these are rough jottings / scribbling without any vital details. This paper is in the nature of dumb document which do not give any meaning to the figures / notings therein. The figures are in coded language and the same has been deciphered on mere presumption without there being any corroborative evidence. Merely by looking at this paper, it could not be inferred that the assessee actually received those sums. Addition of cash seizure - assessee attributed cash to various family members - HELD THAT:- There was no justification for making separate addition on this account. Accordingly, the addition was deleted against which the revenue is in further appeal before us.It is finding of Ld. CIT(A) that the assessee made disclosure of Rs. 90 Lacs towards cash whereas cash was found only for Rs. 8.93 Lacs only. This being the case, no separate addition is warranted for the same. We order so. The corresponding grounds stand dismissed. Profit on sale of agricultural land - assessee submitted that it had sold agricultural land in rural area and the profit was duly shown in the capital account - AO added the same as capital gains - HELD THAT:- It is factual finding of Ld. CIT(A) that the pieces of lands as sold by the assessee, at the relevant point of time, were rural agricultural land since the same were not covered within the municipal limits of Gwalior before 31-01-2014. The copies of Khasra / Khatoni and sale deed established the fact that the lands were agricultural lands. The lands were held by the assessee as investment and not a trading stock. All these facts remain uncontroverted before us. Therefore, no fault could be found in the adjudication of Ld. CIT(A), on this issue. The corresponding grounds of revenue’s appeal stand dismissed. Addition of fresh credits - assessee reflected fresh credits in it books from 6 persons / entities - AO rejected the explanation of the assessee and added the same u/s 68 - CIT(A) deleted addition - HELD THAT:- It could be seen that with respect to credit the assessee has filed balance confirmation containing PAN and address of the lender. This being the case, the ingredients of Sec.68 were duly fulfilled. Therefore, we delete this addition. The amount represents post dated cheques given to Shri Satender Singh as part of advance payment. The cheques remained unrepresented for two years and the entry was reversed. Thus, the assessee has not received any money. It was merely an accounting entry which stood reversed later on. This being the case, the addition of Rs. 1.14 Lacs stands deleted. The corresponding grounds of assessee’s appeal stand allowed. Additions for purchase of land - HELD THAT:- Upon perusal of adjudication of CIT(A), it could be ascertained that the alleged undisclosed investments were duly reflected in the books of accounts and the transactions have happened through banking channels only. Therefore, the adjudication of CIT(A) could not be faulted with. We order so. The corresponding grounds of revenue’s appeal stand dismissed. Disallowance of expenditure - assessee claimed various expenditure u/s 57(iii) which includes depreciation, interest on housing loan, car loan and interest paid to two entities - HELD THAT:- The assessee earned business income of Rs. 4.84 Lacs against which the assessee incurred various expenses viz. car depreciation, car interest loan and bank commission. These expenses were related to business activities only and therefore, allowable to the assessee. The interest paid on house loan was allowable against house property income. The claim was held to be allowable subject to production of necessary evidence relating to payment of interest. Addition of Jewellery - jewellery weighing 4055.73 grams valuing for Rs. 79.76 Lacs was found and the assessee was directed to explain the source of the same -assessee attributed the jewellery to various family members - AO accepted the explanation for jewellery stated to be belonging to assessee and his wife but rejected explanation for jewellery inherited by the assessee and jewellery belonging to daughter and minor son - HELD THAT:- We find that CBDT Instruction No.1916 dated 11-05-1994, considering the prevailing customs / tradition, provides for concession of 500 grams of jewellery per married lady, 250 grams of jewellery per unmarried lady and 100 grams per male member of the family. By allowing these quantities, nothing would be left for addition in assessee’s case. As in the case of Ghanshyam Das Johri [2013 (10) TMI 1187 - ALLAHABAD HIGH COURT] duly supports granting of such concession to the assessee. Therefore, we direct Ld. AO to delete the impugned addition. The grounds raised by the assessee stand allowed. Disallowance of Expenses - interest expenses against income from house property - HELD THAT:- As expenditure was incurred for the purpose of house property could not be established by the assessee. Further, only specified expenditure is allowable under the head Income from House Property. Therefore, this expenditure has rightly been disallowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in the judgment include:Whether the addition of unaccounted payments and investments was justified.Whether the addition of cash seizure was warranted.Whether the profit on the sale of agricultural land should be considered as capital gains.Whether the addition of fresh credits under Section 68 was appropriate.Whether the additions for the purchase of lands were justified.Whether the disallowance of expenditure under Section 57(iii) was correct.Whether the addition of jewellery found during the search was justified.Whether the disallowance of interest expenses against income from house property was appropriate.ISSUE-WISE DETAILED ANALYSISAddition of unaccounted payments and investmentsThe relevant legal framework involves the assessment of undisclosed income based on incriminating documents found during a search. The Court reviewed the CIT(A)'s interpretation that the assessee had already disclosed Rs. 615.70 Lacs, including Rs. 390 Lacs as advance, and incorporated it into the return of income. The addition by the AO was deemed a case of double taxation, which is impermissible. The Court concurred with CIT(A) that the documents in question were 'dumb' and lacked corroborative evidence, leading to the dismissal of the revenue's appeal.Addition of cash seizureThe legal question revolves around whether the cash seized during the search should be added to the assessee's income. The CIT(A) found that the assessee had already disclosed Rs. 90 Lacs towards cash, which included the seized amount of Rs. 8.93 Lacs. Hence, no separate addition was warranted, and the revenue's appeal was dismissed.Profit on sale of agricultural landThe issue was whether the profit from the sale of agricultural land should be taxed as capital gains. The CIT(A) held that the land was not a capital asset under Section 2(14) and was situated outside municipal limits, thus not subject to capital gains tax. The Court upheld this finding, noting the land was held as an investment, not stock-in-trade, and dismissed the revenue's appeal.Addition of fresh creditsThe legal framework involves Section 68, which addresses unexplained credits. The CIT(A) provided detailed findings for each creditor, deleting additions where the assessee provided sufficient evidence, such as confirmation letters and PAN details. The Court agreed with these findings, noting that certain credits were merely accounting entries or already evidenced by financial statements. The corresponding grounds of the revenue's appeal were dismissed.Additions for purchase of landsThe issue was whether the purchase of lands was funded by undisclosed sources. The CIT(A) found that the investments were properly explained and reflected in the books of accounts, with transactions occurring through banking channels. The Court upheld these findings, dismissing the revenue's appeal.Disallowance of expenditureThe legal question involved the disallowance of expenses claimed under Section 57(iii). The CIT(A) found that the expenses were related to business activities and allowable, subject to evidence of payment. The Court found no reason to interfere with these findings, dismissing the revenue's appeal.Addition of JewelleryThe issue was whether the jewellery found during the search should be added to the assessee's income. The CIT(A) confirmed the addition, but the Court referred to CBDT Instruction No.1916, which allows certain concessions for jewellery per family member. The Court directed the AO to delete the addition, allowing the assessee's appeal.Disallowance of ExpensesThe issue was the disallowance of interest expenses against income from house property. The CIT(A) confirmed the disallowance due to a lack of evidence linking the expenses to house property. The Court agreed, affirming the disallowance.SIGNIFICANT HOLDINGSThe Court established several core principles:Double taxation of disclosed income is impermissible.In the absence of corroborative evidence, documents deemed 'dumb' cannot justify additions.Properly explained and documented credits should not be added under Section 68.Jewellery concessions per CBDT Instruction No.1916 should be considered in assessments.The final determinations were as follows:The revenue's appeal was dismissed in its entirety.The assessee's appeal was partly allowed, with specific additions deleted.