B DEVAHIE,CHENNAI vs. ACIT, CENTRAL CIR-3(3), CHENNAI

The solitary issue before our consideration is addition made by the AO based on search proceedings. The deceased assessee Late Smt.B.Devahie is represented by Dr.Balakrishna Raja (Legal Representative). The Form No.36 have been revised for all the years accordingly.

The brief facts of the case are that pursuant to search action u/s.132 of the Act in the case of BKR group of cases on 16.05.2013, the assessee was also covered under search. During the course of assessment proceedings, notice u/s.153A of the Act was issued to the assessee on 29.11.2013. In response to the same, the assessee filed her original return of income as filed on 31.03.2013 declaring a total income of Rs.2.72 Lakhs. The notices u/s. 143(2) and 142(1) of the Act were also issued from time to time calling for details from the assessee.

On verification of the return of income along with the enclosures the AO observed that the assessee has shown unsecured creditors of Rs.1067.11 Lakhs. Hence, the Assessing Officer asked the assessee to file the corresponding details in support of the creditors. Since, the assessee failed to substantiate the unsecured creditors, the AO added the incremental cash credit of Rs.312.11 lakhs to the income of the assessee u/s.68 of the Act and levied the taxes accordingly.

The Assessing Officer also disallowed the agricultural income claimed by the assessee to the extent of Rs.224.15 Lakhs in the A.Y.2013-14 and brought to tax the same as ‘income from other sources’. Similarly, in A.Y.2014-15, the AO disallowed the agricultural income claim of the assessee to the tune of Rs.49.64 Lakhs and brought to tax the same as ‘income from other sources’.

Aggrieved by the order of the AO, the assessee preferred appeal for all the assessment years which were disposed-off by the Ld.CIT(A) by a common order dated 08.10.2018.

Before the ld.CIT(A), the assessee filed additional evidence and hence the ld.CIT(A) sought for remand report from the AO. The assessee also raised emphatically a legal ground that in the absence of any incriminating material, no addition could be made. However, Ld.CIT(A) rejected the plea on the ground that the presence of seized material was not a pre-requisite for issuing notices u/s.153A of the Act. Hence, the ld.CIT(A), considering various judicial decisions in support of his view, the aforesaid legal ground of the assessee was rejected.

Further, on merits of addition made by AO u/s. 68 of the Act for A.Y. 2012- 13 for Rs.312.11 Lakhs, the Ld.CIT(A) noted the factual matrix of the addition and observed that unsecured creditors were remaining unpaid and getting accumulated year after year. It was further observed by Ld.CIT(A) that the amount of Rs.110.94 Lakhs was received from Shri Balakrishna Raja whereas another amount of Rs.108.95 Lakhs was received from M/s.BKR Hotels & Resorts Pvt. Ltd. (BHRPL). ‘Further the ld.CIT(A) also observed that M/s.BRHPL was only a shell company and therefore, such advances could not be considered as genuine. The audited financials of that entity did not reflect any such loans. Shri Balakrishna Raja reflected the loans in his financials statements and therefore, the same was genuine. In view of the above discussion, the claim to the extent of Rs.110.94 Lakhs was accepted and the balance addition of Rs.201.17 Lakhs was confirmed.

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The revenue is also in appeal for the A.Y.2013-14 against the relief given by the ld.CIT(A) on account of telescoping.

The Ld.AR for the assessee advanced arguments and assailed the impugned addition on legal grounds as well as on merits of additions. Whereas the Ld.DR for the revenue has supported the findings given by lower authorities.

In the present case, we are of the view that the Ld.CIT(A) has considered all the issues in correct perspective. The legal grounds raised with respect to jurisdiction u/s.153A of the Act, we do not find any infirmity in the impugned order. It could be seen that A.Ys.2012-13 to 2014-15 are abated assessment years and hence it was open for the AO to call for any details and make an addition on any of the issue. Therefore, the legal grounds raised by the assessee are dismissed.

In respect of merits of the case also, the Ld.CIT(A) has rendered factual findings and after examining the financial statements, arrived at a conclusion that the incremental sundry creditors of Rs.201.17 Lakh remained unsubstantiated for A.Y.2012-13. The estimation of agricultural income of Rs.20,000/- per acre per annum is quite reasonable and no interference is required on the same.

Further, we observed that the Ld.CIT(A) has granted telescoping benefit of sundry creditors liquidated in earlier years and reduced the agricultural income addition to the extent of Rs.28.96 Lakh for A.Y.2013-14 and to the extent of Rs.49.08 Lakh for A.Y.2014-15.

It is pertinent to note that, while adjudicating the appeals of Shri Balakrishna Raja, there is an unutilized telescoping benefit available of Rs.1138.08 Lakh for AY 2011-12 as under:

The Ld. CIT(A) granted further relief on the ground that in A.Y. 2013-14, there was a net reduction in sundry creditors amounting to Rs.145.04 lakh, indicating that these creditors were liquidated during the year. This amount could subsequently be reintroduced in the books in different forms. Accordingly, against the agricultural income of Rs.327.53 lakh as sustained, a telescoping benefit of Rs.145.04 lakh was allowed to the assessee, resulting in a net addition of Rs.182.49 lakh for A.Y. 2013-14.

Further, as noted in para 62 (supra), the unutilized telescoping benefit of Rs.1,373.38 lakh from A.Y. 2011-12 is available for A.Ys. 2013-14 and 2014-15. Applying this benefit, the remaining addition of Rs.182.49 lakh for A.Y. 2013-14 and the addition of Rs.52.90 lakh for A.Y. 2014-15 are deleted. Consequently, the corresponding grounds are disposed of, and the unutilized telescoping benefit now stands at Rs.1,138.08 lakh (Rs.1,373.38 lakh less Rs.182.49 lakh and Rs.52.90 lakh).

Aforesaid three amounts, put together, are less than the unutilized telescoping of Rs.1,138.08 Lakh. Therefore, by granting the telescoping benefit, we delete all the three additions. Hence, all these appeals stand disposed of accordingly. No other ground has been pressed in the appeals.