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2015 (7) TMI 799 - AT - Income TaxValidity of proceeding initiated under section 153C - Disallowance of 50% out of the expenditure claimed on the commission income - Held that:- When the assessee has furnished the names of the persons to whom payments were made and the payments are through cheques, the details of which were before the A.O., nothing prevented him from making enquiry to ascertain the correctness of assessee’s claim or genuineness of the expenditure. Moreover, when the A.O. accepted 50% of the expenditure claimed, there cannot be any doubt with regard to the fact that the expenditure was laid out wholly and exclusively for the purpose of business. The doubt entertained by the A.O. is only on the quantum of expenditure incurred. As stated earlier, the entire expenditure has been incurred through cheque payments. Therefore, the genuineness of the expenditure cannot be doubted without bringing positive evidence on record that the payments made through cheques were not on account of expenditure incurred for earning the commission income or they are bogus. There being no enquiry whatsoever by the A.O. in this regard, the addition made cannot be sustained. The Ld. CIT(A), in our view, while confirming the addition made by the A.O. instead of deciding the merits of the addition on the basis of facts has deliberated more on the issue, whether such addition can be made in a proceeding under section 153C of the Act. Therefore, there being no valid reason behind disallowance of 50% out of the expenditure claimed, we delete the additions made on this account in different assessment years. This ground in all the appeals are therefore allowed. Addition under section 69A of the Act - whether the amount allegedly received by the assessee from Shri Suresh Chand Agarwal towards sale of immovable property can be assessed under the Head “Capital Gains”? - Held that:- Reading of the assessment order as well as order of Ld. CIT(A) gives an impression that department has selectively relied upon the seized material while making the addition. While department has relied upon the unsigned letter dated 19.09.2010 and the receipts, it has completely ignored the agreement of sale, cancellation agreement and the undertaking by assessee and his wife to return back the money to Mr. Suresh Chand Agarwal, receipt executed by Mr.Suresh Chand Agarwal, which were also part of the seized material. Keeping aside for the moment assessee’s claim that he never received the amount of ₹ 2.66 crores and also assuming that the contents of the unsigned letter dated 19.09.2010 and receipts are correct, however, on consideration of the entire seized material as a whole, the situation which emerges is, though the assessee might have received an amount of ₹ 2.66 crores from Mr. Suresh Chand Agarwal towards part sale consideration of the property but he was supposed to return back the money to Mr. Suresh Chand Agarwal once the transaction did not materialize and agreement of sale was cancelled. Therefore, the amount of ₹ 2.66 crores being a debt due to Mr. Suresh Chand Agrwal cannot be treated as income of assessee and his wife. Moreover, it is neither expected nor believable that inspite of the fact that the transaction fell through and property was ultimately sold to a third party, Mr. Suresh Chand Agarwal would have given up his right over such a substantial amount of money and kept quite without recovering it from the assessee. One cannot visualize such a situation as it is beyond human probability and normal human conduct. Therefore, even assuming that assessee might have received the amount of ₹ 2.66 crores from Mr. Suresh Chand Agarwal towards sale of property, it must be equally true that assessee has refunded back the money to Mr. Suresh Chand Agarwal on cancellation of agreement of sale. Receipt executed by Mr. Suresh Chand Agarwal, copy of which is at page No.23 of the paper book bears testimony to this fact. Therefore, the amount in question cannot be brought to tax even under the Head ‘Capital Gain’ as the sale is not complete. Thus, looked at from any angle the amount of ₹ 1,33,00,000 is not taxable at the hands of the assessee. Accordingly, we direct the A.O. to delete the addition. This ground is allowed. - Decided in favour of assessee.
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