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Facts
The assessee, M/s Lahoti India Ltd., received cash advances of ₹1,00,02,000/- for land sale agreements. This cash was stolen in a robbery, later recovered by police, and subsequently refunded to the buyers as the agreements were cancelled. The Assessing Officer and CIT(A) added this amount as concealed income, relying on a director's statement during a survey.
Held
The Tribunal observed that income can only be treated as such if it has been received or agreed to be received. Since the assessee had already refunded the entire amount through account payee cheques, they no longer possessed the money. Therefore, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
Whether an amount received as advance for a business transaction, which was subsequently stolen, recovered, and then refunded to the parties, constitutes taxable income, particularly when a director's admission during a survey is contested.
Sections Cited
143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 15.03.2013 for the AY 2009-10.
The only issue pressed at the time of hearing is against the confirmation of addition of ₹1,00,02,000/- by the ld. CIT (A) as made by the ld. AO on account of concealed income.
The facts in brief are that the assessee filed the return of income on 18.09.2019, declaring total income at ₹ Nil. The case of the assessee was processed u/s 143(1) of the Act, accepting the return of income. Thereafter, the case of the assessee was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS) and statutory notices were duly issued and served upon the assessee. Pertinent to note that during the year the assessee company earned income by way of rent
Amount of Name of the Companies Advances received 1. Sushil Marketing Pvt. Ltd. ₹25,01,000 2. Orbitral Contractors & Financiers Pvt. Ltd. ₹25,00,000 3. Welspun Sales Pvt. Ltd. ₹25,01,000 4. Rainy Trading Pvt. Ltd. ₹25,00,000
The assessee company received the cash advance from above four companies aggregating to ₹1,00,02,000/-. On 13.01.2009, at around 09.50 PM, a theft occurred at the premises of the assessee and the cash amount was stolen. In the theft, 2 persons were involved, one is the ex-employee and another the existing employee of the assessee company. The assessee registered an FIR with the Hare police station. The assessee informed the income tax authorities about the theft of money by armed robbers. The police recovered the money from the miscreants which included ex-employee and the existing employee with some outsiders. The police department deposited the same before the ld. Chief Metropolitan Magistrate, who directed further investigation into the ownership and the manner of assessee’s possession of money. The assessee explained the source of money to the police authorities in the statement taken by them for investigation and on the basis of the police investigation report, the trial court issued order for restoration of cash to the assessee. In the meantime, the contracts entered into with the four companies were also cancelled by them and the assessee refunded the money through banking channel on 26.03.2009, through account payee cheques which duly reflected in the bank statement and in the return filed by the assessee. The amount of ₹1,00,02,000/- was not shown as income on
In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by relying on the presumptions, surmises and conjunctures by observing and holding as under:-
“23. The agreement about real transactions takes place in secret and direct evidence about such discreet transaction/agreement would be not available to the department in the normal circumstances during assessment proceedings. The result of this transaction of showing money received from four companies was designed that so as to avoid payment of taxes were by the appellant. It is held that after considering the surrounding circumstances and applying the test of human probabilities it is rightly concluded that the fact mentioned in the statement of facts that the assessee entered into contracts with the companies for selling to them etc. and the negotiations fizzling out near completion stage and intending purchasing companies agreeing to give the assessee cash by way of advance towards consideration of the plots of land are unbelievable and false. In the facts and circumstances where appellant has not been
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25.02.2025.