2017 (11) TMI 668 - AT - Income Tax

Addition as unexplained money U/s 69A in respect of unsecured loan - Held that - The assessee has received ₹ 25.00 lacs from Shri S.P. Singh. The assessee has submitted the PAN card of Shri S.P. Singh. Shri S.P. Singh has also filed a civil case against the assessee to recover the amount. These facts are undisputed. The assessee had disclosed the receipt of ₹ 25.00 lacs in her books of account. The amount was received through banking channels only. The ld. CIT(A) himself has recorded that the appellant is enjoying the money received from Shri Satpal Singhy without any intention to return the same. This fact itself shows that there cannot be an addition for the receipt of the amount from Shri S.P. Singh. Further the ld. CIT(A) s observation that this is also covered by the provisions of Section 56(1)(vii)(a) of the Act is also unjustified. The pending civil suit for recovery of the liability against the assessee itself suggest that provisions of Section U/s 56(1)(vii)(a) of the Act cannot be invoked at this stage. In view of these facts, we direct to delete the addition. Addition as undisclosed investment in purchase of immovable property U/s 69 - Held that - We observe that in the earlier pleadings that the ld. AR had submitted that the assessee was having only agricultural income but while explaining the opening cash balance, the ld AR of the assessee has admitted that the assessee was also having dairy business. There is no evidence available on record, which establishes that the assessee was having any other income than agricultural income. In view of all, we direct to accept the source from agricultural income to the tune of ₹ 2.00 lacs only and the balance amount of ₹ 2,94,290/- remains unexplained, hence addition to that extent is sustained. Hence, ground No. 2 of the appeal is partly allowed. Addition made to Mr. Ankush treating it as advance made from undisclosed sources - Addition treating agriculture income as undisclosed income - Held that - We find that the assessee has taken the income out of business of ₹ 3,58,662/- as source to explain the advance to Shri Ankush. The agricultural income declared was ₹ 7.80 lacs, for which the separate addition has been also made by the Assessing Officer. Thus, the advance to Shri Ankush of ₹ 10.00 lacs which apparently explained by the assessee is out of the income from business and agricultural income so claimed. In the earlier paragraph of the order, we have also dismissed the claim of the assessee regarding the income from business and estimated the agricultural income at ₹ 2.00 lacs. In this cash flow statement, it was taken as ₹ 7.80 lacs. Thus considering the fact that the addition can be made only either for advance of ₹ 10.00 lacs or the income so declared from business and agriculture. The facts regarding the agricultural income are established but the quantum of agricultural income appears to be on higher side. The income from the business declared at ₹ 3,58,662/- is not established, therefore, considering the totality of the facts and circumstances regarding the agricultural income, the opening cash balance and claim of business income unsustained and also other facts and circumstances, we sustain the addition of ₹ 10.00 lacs advance made to Mr. Ankush where source of the same is not established. However, we direct to delete the addition made on account of agricultural income of ₹ 7.80 lacs as the same was claimed as source of the advance to Mr. Ankush. Hence, ground No. 3 of the appeal is dismissed and ground of the No. 4 of the appeal is allowed.

Summary

Issues:
1. Addition of unexplained money received as a loan.
2. Addition of undisclosed investment in the purchase of immovable property.
3. Addition of an advance given from undisclosed sources.
4. Treatment of agricultural income as undisclosed income.

Issue 1:
The appeal concerns the addition of ?25,00,000 as unexplained money received as a loan. The assessee argued that the loan was duly recorded and supported by documentary evidence. The tribunal found the transaction genuine, as evidenced by the PAN card of the lender and a civil case filed for recovery. The tribunal directed deletion of the addition, noting the lack of intention to repay the loan and rejecting the application of Section 56(1)(vii)(a) of the Act.

Issue 2:
The second issue pertains to the addition of ?34,94,290 as undisclosed investment in immovable property. The assessee provided detailed explanations and evidence regarding the sources of funds, including loans and cash in hand. The tribunal considered the submissions, including confirmations and statements from the parties involved, and directed deletion of the addition, emphasizing that the source of funds was adequately explained.

Issue 3:
The third issue involves the addition of an advance given to Mr. Ankush from undisclosed sources. The assessee presented a cash flow statement to explain the source of the advance. The tribunal analyzed the cash flow statement and upheld the addition of ?10,00,000 as the source of the advance was not adequately established. However, the tribunal deleted the addition related to agricultural income, which was claimed as the source of the advance.

Issue 4:
The final issue concerns the treatment of agricultural income as undisclosed income. The tribunal noted discrepancies in the income declared by the assessee and made adjustments based on the evidence presented. While partially allowing the appeal, the tribunal sustained an addition of ?2,94,290 as unexplained, while deleting the addition related to agricultural income.

In conclusion, the tribunal partly allowed the appeal, directing the deletion of certain additions while upholding others based on the evidence and explanations provided by the assessee. The judgment highlights the importance of substantiating sources of funds and income to avoid additions under relevant provisions of the Income Tax Act.