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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI. B. R. BASKARAN & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal has been filed by revenue against order dated27/09/2017, passed by Ld.CIT(A) Bangalore for assessment year 2007-08, on following grounds of appeal: “1. The Order of the Ld. CIT (A), in so far as it is prejudicial to the interest of the Revenue, is opposed to law and the fact and circumstances of the case.
2. On facts of the case, whether the decision of the Ld CIT (A) is right in allowing the appeal of assessee, when the assessee gave a commitment
Page 2 of 8 ITA 2470/Bang/2017 before the Assessing Officer during Survey proceedings that assessee will declare additional income of Rs. 7 Crores. 3. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 4. The appellant craves leave to add, alter, amend and / or delete any of the grounds that may be urged.”
Brief facts of the case are as under: 2. Only issue alleged by revenue is regarding deleting addition of Rs.7crores, even after commitment by assessee to offer it to tax during survey proceedings.
The brief facts of the case are that the appellant is an individual and Chairman of M/s. Children Education Society. The appellant filed his return of income on 12.09.2007 declaring income of Rs. 3042030/-. A Survey was conducted in the premises of M/s. Children Education Society and the assessee gave a commitment before the A.O. on 29.03.2007 that he will declare in his individual capacity a total income of Rs.7 Crores in the name of the appellant, Shri S.N.V.L.Narasimha Raju and Smt. Shakunthala. The above commitment given by the appellant was further confirmed by the letter dated 18.04.2007 filed before the A.O. Although the appellant gave the above commitment, he did not disclose the additional income of Rs.7 Crores as per the commitment either in his hands or in the names of the other family members mentioned above. Hence, the A.O. asked the appellant to clarify his stand with regard to the additional income to be disclosed in the assessment. The appellant contended that he had declared non-existing income out of desperation since certain original papers were impounded in course of Survey. The Page 3 of 8 ITA 2470/Bang/2017 A.O. has examined this stand of the appellant and has rejected the same observing that the appellant had given the commitment on 2 occasions with a time gap of 20 days. Hence, the plea of the desperation behind giving the above commitment of offering additional income was rejected by the AO.
In survey, an original agreement to sell executed on 17.04.2006 between Sri Nagabhushan and Children Education Society as per which sale consideration of Rs.7,05,67,200/- was agreed upon for purchase of 45 guntas of land, was found. The A.O. has set-out the payments made in cash and cheque to the extent of Rs.6.35 Crores in respect of the above agreement. The A.O. has also mentioned that in the survey, a Sale Deed executed by Sri Nagabhushan on 08.06.2006 showing consideration of Rs.1 Crore only was found and the appellant had agreed that the actual sale consideration for purchase of the lands was Rs.7,05,67,200/- in a statement u/s.131 on 08.12.200.
The A.O. has observed in the assessment order that the investment in purchase of land was made by M/s. Children Education Society and an addition towards unexplained investment towards purchase of converted land by M/s. Children Education Society in respect of the above transaction has already been made. The A.O. noted that the difference between the consideration as per the above sale agreement and sale deed has been assessed on substantive basis in the hands of MIs. Children Education Society and since the appellant had agreed to offer the additional income of Rs.7 Crores in his hands and his other family members, the same is considered in the appellant's case on protective basis. The A.O has observed that the other family
Page 4 of 8 ITA 2470/Bang/2017 members of the appellant were not party to the undertaking of the appellant and hence, no addition was made in their hands. For this reason, the A.O. made the protective addition of Rs. 7 Crores in the case of the appellant 6. Aggrieved by order of Ld.AO assessee preferred appeal before Ld.CIT(A) 7. Ld.CIT(A) decided the issue as under: “6.2 After considering the above submissions, I am of the view that the protective addition made in the case of the appellant has to be deleted. It is seen that the appellant had voluntarily admitted that a sum of Rs.7 Crores will be offered as additional income in his hands and in the hands of 2 other family members before the A.Q. The A.O. has held that the above admission of the appellant was due to the discovery of the unexplained investment in purchase of property by MIs. Children Education Society in course of Survey. Since the unexplained investment related to NI/s. Children Education Society, the A.O. has taxed the appellant only on protective basis and not substantive basis. As such, there is no dispute that the material found in course of Survey related to M/s. Children Education Society and not the appellant. 6.3 It has been brought to my notice that the A.O. in the case of MIs. Children Education Society had originally made an addition of Rs.6,05,67,200/- as unexplained investment in purchase of land on the basis of the documents found in course of Survey. This addition was made on the basis of the consideration of Rs.7,05,67,200/as per the sale agreement and deducting the sum of Rs. 1,00,00,000/- shown in the sale deed. MIs. Children Education Society filed an application u/s.154 of the Act, before the A.O. that the entire consideration of Rs.7,05,67,200/- was reflected in its books of accounts and there was no unexplained investment. The A.O. after examining the said claim has passed an order u/s.154 of the Act on 02.06.20 10 reducing the addition to Rs.4,05,67,200/- after accepting that a sum of Rs.2,00,00,000/- paid by cheque was to be accepted as explained. The A.O. held that the cash payments were not explained and rejected the claim of f'41s. Children Education Society at the cash payments were record...d in its books of accounts. Hence, even the unexplained investment has been worked out to Rs. 4,05,67,200/- and not Rs. 7,00,00,000/- 6.4 I also find that the Commissioner of Income-tax [Appeals]-14, LTU, Bangalore vide order in dated 20.09.2016 has deleted the addition of Rs.6,05,67,200/- holding that the investment made by M/s. Children Education Society in purchase of land was reflected in the Balance Sheet and the provisions of section 69 of the Act, cannot be invoked. Hence, there is no unexplained investment made by M/s. Children Education Society as per the appellate order passed by the CIT [A] - 14, Bangalore.
Page 5 of 8 ITA 2470/Bang/2017 6.5 Thus the substantive addition made in the case of M/s. Children Education society has been deleted on merit holding that there is no unexplained investment at all. Considering the fact that the additional income was agreed to be offered by the appellant on the basis of the above findings in Survey regarding unexplained investment made by NI/s. Children Education Society and also considering the fact that the addition has been deleted on merits, the protective addition made in the hands of the appellant does not require to be sustained either on protective basis or on substantive basis. The fact that the appellant agreed to offer the income cannot be the sole basis for making any assessment as the income has to be assessed only in the i1.nlUS o1T iliC proper person and not merely oil the basis of the admission. Accordingly, the protective addition is hereby deleted.”
Aggrieved by order of Ld.CIT(A), revenue is in appeal before us.
Ld.CIT.DR placed reliance on order of Ld.AO. 10. Ld.AR submitted that, alleged unexplained investment was substantively assessed in the hands of M/s Childrens Education Society for an amount of Rs.6,05,67,200/-. Ld.AR submitted before us that M/s.Childrens Education Society filed rectification application before assessing officer, for a mistake arisen in quantum of addition. He placed reliance on order under section 154 placed at page 33 of paper book, wherein, addition substantially stood reduced to Rs.2,00,00,000/-. 11. Ld.AR submitted that protective addition Rs.7,00,00,000/- made in hands of assessee for year under appeal is unjustified and unwarranted. 12. Ld.AR brought to our notice order of this Tribunal dated 28.08.2019, passed in case of M/s.Childrens Education Society in for assessment year 2007-08 in respect to subject issue as under: 15. We find that there is no other issue in the appeal of the revenue for A. Y. 2011 – 12 but in A. Y. 2007 08, there is one more issue raised by the revenue. This issue is raised by the revenue as per Ground No. 3 in respect of addition
Page 6 of 8 ITA 2470/Bang/2017 made by the AO for alleged unexplained investment deleted by CIT (A). We find that that as per the original assessment order dated 31.12.2009, addition on this account was made of Rs. 665672001- but as per the order dated 02.06.2010 passed u/s 154 copy available on pages 28 to 30 of the paper book, this addition was reduced by Rs. 2 Crores. We also find that this addition was made by the AO on this basis that as per the agreement to sell dated 17.04.2006 impounded, the actual consideration is Rs, 7,05,67,200/- as against the registered consideration of Rs. 1 crore and in this manner, the AO made addition of Rs. 665,67,200/- later reduced by Rs. 2 Crores as per order u/s 154 because it was shown that out of this payment of Rs. 665,67,200/-, Rs. 2 Crores was paid by way of two cheques. Although, this was the submission that entire payment is accounted for and hence, no addition justified but the AO allowed relief u/s 154 to the extent of Rs.2 crores being two payments made by cheque an us, the learned AR of the assessee has produced the balance Sheet of the assessee also as on 31.03.2007 and in the same, investment in Land at Sy. No. 6/9 and 6/11 (45 Guntas) shown at Rs.716,71,470!-n as per copy of ledger account available on pages 16 &b 17 of the paper book initial cash payment was made of Rs. 1 Crore in March 2006 and in F. Y. 2006 - 07 two payments totalling Rs. 2 Crores weremade by cheques and an amount of Rs. 405,67,2001- was made by cash on various dates. The A0 has accepted the cash payment of Rs. 1 Crore paid in F. Y. 2005 - 06 in the assessment order itself and made addition of the balanc. amount of Rs. 605.67200!- and later in the order u/s 154, he accepted the cheque payments. As per Note 5 attached to the said Balance Sheet as on 31.03.2007 showing break up of cash and bank balances, there was cash in hand of Rs 46853,019.09 as on 31.03.2007 even after this cash payment of Rs. 405,67,200/- and hence, cash availability cannot be doubted. Entire cash payment and cheque payment for this land is shown in the balance sheet as investment in fixed assets. In view of these entire facts, it cannot be said that there is any unexplained investment in this land in question and therefore, we find no reason to interfere in the order CIT (A) on this issue also.
Ld.AR submitted that this tribunal has rendered a finding regarding Rs.7,05,67,200/- stood accounted for in the hands of M/s Childrens Education Society, and therefore protective assessment in the hands of assessee to be deleted.
Ld.CIT,DR would not contradict the above factual observation by this Tribunal. 15. We have perused submissions advanced by both sides in light of records placed before us.
Page 7 of 8 ITA 2470/Bang/2017
In the present case sum of Rs.7,05,67,200/- has been added in the hands of assessee on protective basis. This Tribunal deleted addition in case of M/s Children Education by holding that Rs.7,05,67,200/- stood explained and accounted for and that Balance Sheet of M/s Children Education Society revealed sufficient cash availability as on 31/03/2007. Under such circumstances we do not find any merit in assessing the amount in the hands of assessee on protective basis. Accordingly, grounds raised by revenue stands allowed. In the result, appeal by revenue stands allowed for statistical purposes.
Order pronounced in the open court on 14th August, 2020.