VINOD KUMAR,HARIDWAR vs. ITO, ROORKEE
What did the Tribunal hold?
The Tribunal deleted the addition of Rs. 75,000/- for unexplained investment in the liquor shop, finding the assessee's cash flow statement and past capital sufficient. It also deleted the addition of Rs. 2,65,100/- for sale of trees, as the creditor confirmed the transaction and its source. However, the addition of Rs. 2,36,000/- as unexplained gifts was sustained due to the donors' lack of creditworthiness and the failure to prove the availability of funds.
What were the facts?
The assessee claimed an investment of Rs. 1,75,000/- in a liquor shop from accumulated capital. The AO added this as unexplained investment, and the CIT(A) restricted the addition to Rs. 75,000/-. The assessee also claimed receipts of Rs. 2,65,100/- from the sale of trees and Rs. 2,36,000/- as gifts.
What were the issues?
Whether the investment in a liquor shop and sale of trees were adequately explained, and whether gifts received from relatives and friends were from undisclosed sources.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER
Per L.P. Sahu, Accountant Member:
This appeal by the assessee arises out of order dated 27.02.2013 of ld. CIT(A), Dehradun for the assessment year 2009-10.
The first issue challenged by the assessee is sustenance of addition of Rs.75,000/- on account unexplained investment in liquor shop. The brief facts are that the assessee claimed to have made initial investment of Rs.1,75,000/- in its business out of the opening balance of capital accumulated over the years. The AO rejected the claim of assessee for want of any supporting evidence and treating the above sum as unexplained investment, added the same to the total income of the assessee. The ld. CIT(A) in appeal restricted the addition to Rs.75,000/- assuming that the assessee would have some past savings and also citing some other cases of liquor dealers as mentioned in para 1.1 of the impugned order, wherein similar claim on identical facts was disallowed. It was also observed that the return of income was filed by the assessee simply to build up the capital. Being aggrieved, the assessee is in appeal before us.
The ld. Counsel for the assessee submitted that the assessee has shown capital balance of Rs.2,23,000/- in the return for the A.Y. 2008-09, out of which the assessee made investment of Rs.1,75,000/- in the year under consideration. The assessee has also submitted cash flow statement which shows opening cash balance as on 01.04.2007 of Rs.1,00,000/- and income of Rs.1,83,000/- consisting of brokerage income and agricultural income of Rs.85,000/- and after showing withdrawals of Rs.60,000/-, the assessee has shown closing balance of Rs.2,23,000/-, which was sufficient to invest Rs.1,75,000/- in the liquor shop.
The ld. DR, on the other hand, relied on the order of the authority below and submitted that the returns were filed by the assessee for the purpose of capital building and therefore, the explanation of the assessee is not acceptable.
Having considered the rival submissions, we do not find any justification to sustain the findings of the ld. CIT(A). The assessee has filed cash flow statement which shows the opening balance of his capital account at Rs.2,23,000/-. It is an admitted fact that the investment was made in A.Y. 2009-10 and there is nothing on record against the fact that the amount invested by assessee represents the opening balance of his capital account. No enquiry or investigation relating to assessee’s past saving has been made. The appellant is holding 30 bighas of agricultural land, out of which he has shown agricultural income. Countering the instances given by CIT(A), the ld. Counsel for the assessee submitted that the same CIT(A) in the identical facts and circumstances of the case in the case of other liquor contractor Smt. Sumitra Devi has deleted similar addition vide order dated 26.02.2013 (copy placed on record). In view of these facts, in our opinion, the impugned addition of Rs.75,000/- is liable to be deleted.
The second issue regarding issuance of penalty notice u/s. 271(1)(c) of the Act on the basis of agreed addition ofRs.5,61,077/- u/s. 40A(3), has not been pressed by the ld. Counsel. Therefore, the same is dismissed as not pressed.
The next issue under challenge is that the assessee claimed to have received a sum of Rs.2,65,100/- against sale of trees from one Mr. Khalil who appeared before the AO and confirmed the transaction in his statement. Mr. Khalil also declared that he received the amount from a commission agent of timber. The AO did not accept the explanation of assessee and treated the sum as undisclosed income of assessee. The CIT(A) confirmed the addition.
Having considered the rival submissions, we find that the assessee has explained the source of the sum received as sale consideration of trees from Mr. Khalil. The creditor was produced before the AO who confirmed having given the money to the assessee. He also declared the source of money received by him. However, the authorities below before rejecting the claim of assessee have failed to make any enquiry from the person who appeared before the AO and made the statements confirming the transaction. Without bringing any contrary material on record, the claim of the assessee could not be disbelieved. We accordingly reverse the finding of the ld. CIT(A) on this count and delete the addition of Rs.2,65,100/-.
The last issue relates to addition of Rs.2,36,000/- claimed by the assessee to have been received as gifts from various relatives and friends. The AO noticed that the alleged donors were agriculturists having small land
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