TMI Blog2015 (8) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... tained with regard to their creditworthiness. In the aforesaid facts and circumstances, the addition being not based on proper evidence, we are not able to sustain the same - Decided in favour of assessee. Addition on the profit on sale of land - Held that:- As could be seen, at the assessment stage, assessee has claimed that apart from the payment made to original owners, assessee has also paid to various other persons towards surrender of their right over the property. As it appears, AO has not disputed the aforesaid claim of assessee. The only reason, he treated the surplus as profit of assessee is, the land in question is stock-in trade and not investment. That being the case, we are unable to understand on what basis, ld. CIT(A) concluded that assessee has failed to produce any evidence with regard to payment made to various persons. As rightly submitted by ld. AR, whether it is an investment or stock-in-trade, payment made by assessee has to be taken into account for arriving at the cost incurred. Therefore, in either case, there cannot be any surplus to be treated as income of assessee. Since the aforesaid aspect has not been considered either by AO or by ld. CIT(A) in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) All the share applicants and agriculturists, many of them having only agriculture as their only source of income. ii) Bills were produced in support of the alleged share of agricultural produce which is stated to be the source for the share application money. Scrutiny of the bills however showed some unusual patters like the bills issued by one commission agent to several persons did not have the same features/details, the dates on the bills did not show a contiguous patterns, the rates varied on the same date in respect of the same agent etc. iii) None of the share applicants is assessed to income tax. iv) The entire share application money has been given and received in cash. 4.1 For further verification of authenticity of assessee s claim, AO conducted survey u/s 133A of the Act in the business premises of the commission agents located in Madanpalle, Chittor Dist., to whom the share applicants claimed to have sold their agricultural products. As stated by AO in the assessment order, in course of survey statements were recorded from several commission agents and when they were confronted with the claim made by share applicants that they have sold their a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the contradicting statements of share applicants and commission agents, AO was of the view that claim of share applicants that they have sold agricultural produce and the money invested towards share application was out of such income is not believable. As far as the submission of assessee that share application money cannot be considered as unexplained cash credit at the hands of assessee, AO observed that the decision relied upon by assessee is rendered in case of a large joint stock company where shareholding is wide spread unlike assessee where share application money is raised from very limited number of persons. Thus, AO opined that share applicants not being income-tax assessees and being persons of small means and illiterate, assessee is under heavy obligation to explain satisfactorily the genuineness of the share application money. AO finally observed that since assessee has failed to prove the creditworthiness of share applicants, introduction of capital by way of share application money has to be treated as unexplained cash credit of assessee. Accordingly, he added the amount of ₹ 25 lakhs to the income of assessee. Being aggrieved of such addition, assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon ble Delhi High Court in case of Stellar Investments Ltd., 192 ITR 287 and the decision of the Hon ble Supreme Court in case of CIT Vs. Stellar Investments Ltd., 251 ITR 263 wherein the decision of the Hon ble Delhi High Court was affirmed. It was submitted by ld. AR, in case of share application money, AO cannot make any addition at the hands of assessee , if AO has any doubt with regard to creditworthiness of the share applicants, then, addition can be considered in their hands. In this context, ld. AR relied upon a decision of the Hon ble AP High Court in case of CIT Vs. Lanco Investments Ltd., 242 ITR 357. As far as factual aspect is concerned, ld. AR submitted, there cannot be any dispute to the fact that all the share applicants are having agricultural land holding and they are engaged in agricultural activities. Therefore, merely relying upon the statement given by some commission agents, it cannot be concluded that share applicants do not have any agricultural income. More so, when all the share applicants have confirmed of having invested in assessee company. Under these circumstances, assessee cannot be asked to prove the source of source. 7. Ld. DR, on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the share applicants claim had conducted survey operation in the business premises of the commission agents and in the statement recorded from commission agents they have denied of having purchased any product from assessee or issued any bills. It is further evident that solely relying upon the statements of the commission agents, AO has treated the share application money as unexplained cash credit, which is also confirmed by ld. CIT(A). Though, it may be a fact that share applicant s claim for sale of agricultural produce was contradicted by some commission agents, but, their denial may be for various reasons, one of them being purchaser may be out of account. However, solely on the basis of denial by some commission agents it cannot be concluded that share applicants were not having any agricultural income. More so, when AO has made enquiries with the concerned share applicants and has not found any adverse material to dispute the share applicant s claim of having agricultural land holding or the fact that they are engaged in agricultural activity. The only thing the statement of commission agents prove, accepting them to be correct, share applicant s claim that they have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A), however, confirmed the addition by observing as under: 7.2 I have considered the arguments of the appellant as well as the facts on record and I find that the contentions of the appellant is absolutely unfounded and not supported by any evidence whatsoever. No details whatsoever have been submitted regarding the persons to whom payments were made, the cheques nos., the details of bank accounts, etc. Whenever, a property is purchased with an encumbrance, the price is invariably much lower than the market price because of the fact that possession of the property is not clear. These facts are also mentioned in the sale deed. No such fact has been brought on record in the present case. In view of facts and circumstances, it is clear that the explanation submitted by the appellant is without any evidence. Therefore, the addition made by the AO is held to be correctly made. 11. Ld. AR submitted before us, while AO treated the surplus a business income of assessee, ld. CIT(A) has confirmed the addition totally on a different ground. Ld. AR referring to the details of land purchased submitted, amounts were paid to various persons apart from original owners to secure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25, but, he has failed to explain the amounts of ₹ 47,000 and ₹ 50,000. Accordingly, he added an amount of ₹ 97,000 by treating it as unexplained investment in land. Though, assessee challenged the addition before ld. CIT(A), but, ld. CIT(A) also confirmed the addition. 16. Ld. AR reiterating the submissions made before the departmental authorities submitted, assessee is not at all involved in these transactions. It was submitted by ld. AR, amount of ₹ 50,000 shown to be in the name of Bahadur is not related to assessee as the purchaser s name in the document is K. Srinivas Goud. It was submitted, document found at the time of survey may be a link document on the basis of which addition has been made. As far as P.V, Devanand is concerned, ld. AR submitted, opportunity may be given to explain the amount. 17. Ld. DR relied upon the order of ld. CIT(A). 18. We have considered the submissions of the parties and perused the materials on record. As could be seen, AO has made the addition by stating that assessee has failed to explain the aforesaid two amounts. Before ld. CIT(A) also assessee has not made proper representation. Therefore, considering the n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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