2021 (6) TMI 568 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - We note that during the assessment proceedings the CIT(A) held that whatever the amount was deposited in the assessee s account and transmitted to the company was nothing but sale proceeds of land of the company. The assessee has acted just like as an agent of The Surat Dist. Co-op. Spinning Mills Ltd. As such an amount so deposited in assessee s acount does not become the income of the assessee s undisclosed income. During the course of assessment proceedings the assessee submitted full details of the source of deposits made. Hence the question of adding the same in the assessee s hand does not make any sense. Accordingly the CIT(A) deleted the addition correctly. - Decided against revenue. Unexplained expenditure u/s 69C - CIT-A deleted the addition - HELD THAT - We note that assessee has not incurred the expenditure although it is mentioned in various clauses of the development agreement. The AO has not brought any evidence on record which can demonstrate that assessee has incurred expenses for development work. There was no evidence with the AO to prove or even indicate that such amount was spent by assessee on the development of land in concern which was sold. AO made addition purely on surmises and conjecture. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. In the case of Umacharan Shah Bros. 1959 (5) TMI 11 - SUPREME COURT held that suspicion however strong cannot take the place of evidence. Therefore we do not find any infirmity on the order of Ld.CIT(A) hence we approve the order of Ld.CIT(A). Estimation of fees income - assessee was asked to show cause as to why 2% of total amount paid during the year to mill should not be considered as his income for acting as underwriter on the behalf of mill - HELD THAT - As submitted that assessee was granted the right to sell the land on behalf of the mill after developing it and he would get a commission at the rate of 5% of amount in excesses of sell price of Rs. 3951 per sq. mts. However the assessee was facing difficulty to find out the customers for the price more than Rs. 3951 per sq. mts. AO did not agree with the plea of the assessee because no prudent businessmen would carry out such responsible task without earning single rupee vis- -vis huge risk on his head. Assessee did not receive any amount as commission. There was no evidence with the AO either in cheque or cash or received but not shown in the books of account. AO made addition based on surmise and conjecture and such additions are not tenable in law therefore Ld.CIT(A) has rightly deleted the addition made by AO. Hence no interference is required in the order of CIT(A) thus we dismiss Revenue s appeal.

Summary

Issues Involved:
1. Addition of Rs. 1,90,30,400/- on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Addition of Rs. 1,75,32,049/- on account of unexplained expenditure under Section 69C of the Income Tax Act.
3. Addition of Rs. 12,50,000/- on account of estimation of fees income.

Issue-wise Detailed Analysis:

1. Addition of Rs. 1,90,30,400/- on Account of Unexplained Cash Credit Under Section 68:

The Assessing Officer (AO) noted that the assessee deposited huge cash in his bank accounts before his appointment as an underwriter for Surat District Co-Operative Spinning Mills Ltd. The AO suspected that the assessee used black money and made up a story that the money came from customers for plot sales. The AO added Rs. 1,90,30,400/- as unexplained cash credit under Section 68.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, stating that the assessee acted as an agent for the mill and the deposits were sale proceeds of land, not the assessee's undisclosed income. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, noting no infirmity in the order, and dismissed the Revenue's appeal.

2. Addition of Rs. 1,75,32,049/- on Account of Unexplained Expenditure Under Section 69C:

The AO contended that the assessee, as per the agreement, was responsible for various development activities and expenses related to the land sold. The AO argued that the assessee did not maintain books of accounts or provide evidence of these expenses, leading to an addition of Rs. 1,75,32,049/- as unexplained expenditure under Section 69C.

The CIT(A) deleted this addition, noting that the AO did not provide evidence that the assessee incurred such expenses. The ITAT agreed with the CIT(A), emphasizing that additions based on surmises and conjectures are not tenable in law, and dismissed the Revenue's appeal.

3. Addition of Rs. 12,50,000/- on Account of Estimation of Fees Income:

The AO estimated that the assessee must have earned 2% of the total amount paid to the mill as his income for acting as an underwriter, leading to an addition of Rs. 12,50,000/-. The AO based this on the assumption that no prudent businessman would undertake such a task without earning any income.

The CIT(A) deleted this addition, and the ITAT upheld the deletion, noting that there was no evidence that the assessee received any commission. The ITAT emphasized that additions based on surmise and conjecture are not permissible, and dismissed the Revenue's appeal.

Conclusion:

The ITAT dismissed the appeals filed by the Revenue for the assessment years 2004-05, 2005-06, and 2006-07, upholding the CIT(A)'s decisions to delete the additions made by the AO. The ITAT emphasized the importance of evidence over assumptions and conjectures in making additions to an assessee's income.