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2018 (11) TMI 1336 - KERALA HIGH COURTSource of income from which the payments were made by the assessee to Commonwealth Trust - Satisfactory explanation for source - income generated from Abu Dhabi - Held that:- We do not find any reason to sustain the said addition. We see that the Assessing Officer had proceeded on mere surmises and conjectures and had also stated that the assessee was not able to prove that the businesses abroad had not generated any income. The assessee cannot be asked to prove the negative. No material was recovered as to any income having been generated from the businesses abroad. We do not think that an estimation would be proper without any evidence at all. We, hence, uphold the order of the Tribunal deleting the addition from the income generated from Abu Dhabi. We immediately observe that the source found from such income, by the first appellate authority would however have to be reduced in view of the said finding; while considering the source for the real estate transaction. Assessee had claimed as source from sale of various items of the tile factory, namely timber, machinery etc. - The consideration shown in the agreement was for the building also. Before the sale was concluded, the assessee had obtained possession of the property and had also demolished the buildings and dismantled the plant and machinery and sold the same. The assessee submits that the same cannot be treated as his income. However, if the said amounts has to be treated as a source of income for the purpose of consideration, this definitely should be treated as an income at the hands of the assessee. At least, to the extent, it was treated as a source. In such circumstances, the same has to be treated as an undisclosed income for which the assessee would be liable to pay tax. Capital gains - There was a surrender of the land and buildings to the assessee on the basis of the agreement, since before the sale was concluded, the buildings were demolished and the plant and machinery dismantled and sold. The assessee, who had obtained possession of the land and building, had also effected sale of the same and had obtained ₹ 1,19,75,000/- which is treated as income for the previous assessment year. In such circumstances, the order of the Tribunal deleting the assessment with respect to capital gains has also to be set aside. The questions of law framed are answered in favour of the revenue and against the assessee; especially the one on perversity. The Tribunal without any application of mind and without reference to the facts acted in a perverse manner in having deleted the additions for undisclosed income for the three years and confining it to ₹ 50,00,00/- without any basis. We make it clear that we have gone into the facts only to avoid multiplicity of litigation by remanding the matter to the Tribunal as also noticing that the assessee is no more. The addition on undisclosed income for the years, with respect to the payments made to the Trust in pursuance of the sale agreement, the source of which was not convincingly proved,will be:- (i) ₹ 71,50,100/- for the assessment year 2003-04, (ii) ₹ 66,14,500/- for the assessment year 2004-05 and (iii) ₹ 18,98,200/- for the assessment year 2005- 06. The addition on account of undisclosed income from Abu Dhabi will stand deleted as done by the Tribunal. The addition to income from sale of timber and demolished parts of the factory building and that on capital gains would stand restored; on capital gains confirming the modification/direction of the First Appellate Authority, to grant allowance of ₹ 2.5 lakhs as expenditure. We make it clear that the recovery can only be from the assets of the assessee as inherited by the legal heirs. - Decided against assessee.
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