2016 (8) TMI 1585 - AT - Income Tax

Assessment u/s 153A - Rejection of books of accounts - estimation of turnover and profit thereon - Addition based on material on record - Assessing Officer did not accept the books of account, so, he estimated the turnover and profit thereon - AR submitted that these additions are not based on the seized materials at the time of search as discussed above, but only on the basis of cash flow statement prepared by assessee irrespective of correlation to search material - HELD THAT - Addition in question has no nexus with search material, so, addition is not justified in view of decision of All Cargo Global Logistic Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) So, in the proceedings after search in the assessment u/s.153A of the Act addition should have nexus with seized material found at the time of search. Without prejudice to above, estimation of turnover and profit thereon in question is also not based on material on record. Agreeing to alternative contention of assessee, we find that assessee had been doing agency work on behalf of other parties. There is nothing on record to suggest that assessee was doing the said transaction at his own. Assessing Officer has not brought anything on record to suggest that above land transaction were done by assessee in his name. It could have been corroborated by AO with real instances of transaction which has not been done by him. In such situation, assessee cannot be taxed on the basis of on money transaction of its client. So, addition in hand of assessee is not justified. Same is directed to be deleted. Unsecured loan as undisclosed cash credit u/s 68 - HELD THAT - Agreeing to the contention of ld. Authorized Representative, we are of the view that Assessing Officer was not justified in making addition u/s.68 of the Act without making nexus of the same with the seized material found at the time of search. Moreover, non appearance of creditor before Assessing Officer is not sound basis of addition in question while they have confirmed the same and all details of parties were with Assessing Officer at relevant point of time including their PAN number. Assessing Officer has not exercise his option to summon parties to verify the fact which has not been done for the reasons known to him. So, addition in question is not justified. Same is directed to be deleted. Addition u/s.68 on account of current liabilities as unexplained cash credit - A ssessment of income of deceased assesse e - Assessee failed to establish the identity and creditworthiness of aforesaid parties and genuineness of such transactions u/s.68, So, same was added to the income of deceased assessee - HELD THAT - Since, deceased assessee had filed confirmation from both parties, addition was not warranted. Deceased assessee has categorically given the details of parties and transactions therewith. Once transaction was stated to be completed, so, it was no more liability. All details in this regard were filed before Revenue authorities. Assessee has tried to prove the identity by giving details of parties. Agreeing to alternate contention of assessee, we hold that addition in question having no nexus with seized material as discussed above, so in view of the ratio laid down in All Cargo Global Logistic Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) , addition u/s.68 of the Act is not justified. Under facts and circumstances, the addition in question is directed to be deleted. Addition of household expenses - Estimating withdrawal as against shown in capital account - Assessing Officer estimated withdrawals at Rs.4,80,000/- as against Rs. 2,34,218/- on account of household expenses - HELD THAT - The stand of deceased assessee has been that this addition is on the basis of purely on estimation and having no nexus with the seized material found at the time of search. Agreeing to the contention on behalf of assessee and in view of ratio laid down in All Cargo Global Logistic Ltd. (supra) as discussed above, addition in question is not justified. Same is directed to be deleted. Unexplained expenditure u/s.69C - HELD THAT - There is nothing on record to suggest that assessee was doing the said transaction at his own. Assessing Officer has not brought anything on record to suggest that above land transaction were done by him in his personal capacity. In such situation, assessee cannot be taxed on the basis of on investment transaction of its client. So, addition in hand of assessee is not justified. Same is directed to be deleted. Addition made on account of current liabilities and unsecured loan as cash credit u/s.68 - Assessee has shown current liabilities against various parties narrations - Since, deceased assessee was not able to give satisfactory answer to the Assessing Officer, so, same was u/s.68 - HELD THAT - As stated above, assessee was broker, transactions were doen on behalf of investor. Assessing Officer has brought nothing on record to suggest that as in fact dealing in land as parties. Same could be done by making nexus to land deal. But, on such effort has been made by revenue authorities. In view of above discussion, addition in question is not justified. Same is directed to be deleted. Protective assessment of all deposits of an account - HELD THAT - As the substantive addition on account of unexplained bank deposits made by Assessing Officer in the hands of deceased assessee was deleted. However, in order to safeguard the interest of the Revenue, it was held that protective addition towards unexplained deposits in aforesaid bank account will continue in the hands of assessee till the said amount is finally assessed in the hands of assessee s HUF. Once CIT(A) held that the amount belongs to bank account deposit should be assessed in the hands of Late Sunil D. Gulati (HUF), so, protective addition in case of deceased assessee is not justified and same is directed to be deleted. Addition on account of Deal Wise Excel Sheets for a sum as unexplained expenditure u/s.69C - HELD THAT - A preliminary analysis of these two statements revealed that they had several defects/ shortcomings as outlined in paras 33 to 3.3.4 on page 3-4 of the impugned order for which no clarification was given at the time of assessment. It was concluded that these statements did not reflect the true and correct picture of the business and personal transactions of the appellant and as such could not be relied upon. During course of assessment proceedings, deceased assessee was asked to furnish complete details/explanation in respect of all such DWES along with supporting documents and evidences. Similar issue arose in A.Y. 2003-04 wherein vide para 3 of this order wherein we have deleted similar addition. Facts being similar, so following same reasoning, the addition in question is directed to be deleted. Addition on account of other cash / unaccounted transaction by treating it as unexplained expenditure u/s.69C - HELD THAT - Revenue authorities have to bring concurrent evidence with regard to the said explanation vis- -vis plot. Deceased assessee was not an investor. He was doing investment on behalf of other parties. He might have done something wrong for increasing brokerage business. After search, Revenue authorities had option to unearth transaction correspondence to the expenditure in question which has not been done, meaning thereby, Revenue authorities have not found this document in course of search. So, such transactions done for the sake of business cannot be made sound basis for addition in question. In view of above discussion, addition is not justified. Same is directed to be deleted. Cash/unaccounted transaction by treating same as unexplained expenditure - HELD THAT - As deceased assessee s consistent stand has been accepted by us that he was only a Real Estate agent or broker or deal maker and hence he used to block the plots by giving some advances to the plot owners-cum-farmers on behalf of investors only. Revenue authorities had not brought anything on record to suggest that assessee himself purchased property in question from the farmers. In such a situation, assessee was entitled for brokerage only. In view of above, addition in question is not justified. Same is directed to be deleted.

Summary

Issues Involved:
1. Rejection of books of accounts and estimation of turnover and profit.
2. Addition on account of unsecured loans as unexplained cash credit under Section 68.
3. Addition on account of current liabilities as unexplained cash credit under Section 68.
4. Estimation of higher withdrawals and addition on account of household expenses.
5. Addition on account of Deal Wise Excel Sheets (DWES) as unexplained expenditure under Section 69C.
6. Addition on account of other cash/unaccounted transactions as unexplained expenditure under Section 69C.
7. Protective assessment of unexplained bank deposits.
8. Disallowance of personal expenses and interest under Section 36(1)(iii).

Issue-wise Detailed Analysis:

1. Rejection of Books of Accounts and Estimation of Turnover and Profit:
The deceased assessee's books of accounts were rejected by the Assessing Officer (AO) due to the absence of a Profit & Loss account and supporting documents, leading to an estimated turnover of Rs. 38,06,951 and a net profit of Rs. 15,22,780. The CIT(A) confirmed this rejection. The Tribunal found that the AO did not provide a clear working method for the estimated turnover and profit, and the deceased assessee was acting as a broker, not directly involved in land transactions. Thus, the addition was not justified and was directed to be deleted.

2. Addition on Account of Unsecured Loans as Unexplained Cash Credit under Section 68:
The AO added Rs. 6,80,000 as unexplained cash credit, which was partially confirmed to Rs. 4,80,000 by the CIT(A). The Tribunal found that the AO did not establish a nexus with the seized material and failed to summon the creditors despite having their details. Consequently, the addition of Rs. 4,80,000 was deleted.

3. Addition on Account of Current Liabilities as Unexplained Cash Credit under Section 68:
The AO added Rs. 61,23,440 as unexplained cash credit, which was confirmed by the CIT(A). The Tribunal noted that the transactions were advances for land purchases, and the AO did not establish a nexus with the seized material. Therefore, the addition was not justified and was directed to be deleted.

4. Estimation of Higher Withdrawals and Addition on Account of Household Expenses:
The AO estimated higher withdrawals for household expenses, adding Rs. 2,45,782, which was confirmed by the CIT(A). The Tribunal found no nexus with the seized material and directed the deletion of the addition.

5. Addition on Account of Deal Wise Excel Sheets (DWES) as Unexplained Expenditure under Section 69C:
The AO added Rs. 1,30,000 for AY 2004-05 and Rs. 1,71,000 for AY 2005-06 based on DWES, which were confirmed by the CIT(A). The Tribunal found that the deceased assessee acted as an agent and the transactions were not in his name. Thus, the additions were not justified and were directed to be deleted.

6. Addition on Account of Other Cash/Unaccounted Transactions as Unexplained Expenditure under Section 69C:
The AO added Rs. 1,00,000 for AY 2004-05 and Rs. 16,77,000 for AY 2005-06 based on unaccounted transactions, which were confirmed by the CIT(A). The Tribunal found that the deceased assessee was acting as a broker and not directly involved in the transactions. Therefore, the additions were not justified and were directed to be deleted.

7. Protective Assessment of Unexplained Bank Deposits:
The AO made protective assessments of Rs. 63,51,926 for AY 2005-06 and Rs. 1,56,33,474 for AY 2006-07, which were confirmed by the CIT(A). The Tribunal found that the amounts should be assessed in the hands of the HUF and directed the deletion of the protective additions.

8. Disallowance of Personal Expenses and Interest under Section 36(1)(iii):
The AO disallowed personal expenses and interest under Section 36(1)(iii), which was partially upheld by the CIT(A). The Tribunal upheld the disallowance of interest but directed the deletion of personal expenses due to lack of nexus with the seized material.

Conclusion:
The appeals for AYs 2003-04 to 2005-06 were allowed, and for AYs 2006-07 and 2007-08 were partly allowed, with significant deletions of unjustified additions and protective assessments.