2012 (7) TMI 617 - AT - Income Tax

Tribunal rejects unexplained investment claim in Hotel Hill View, upholds validity of section 153C proceedings

The Assistant Commissioner of Income Tax Madurai. Versus Shri G. Bagavathy Prasad,

The Tribunal upheld the Commissioner's decision to delete the addition of Rs. 46,63,000/- made under section 69 as unexplained investment in Hotel Hill ... Addition under section 69 as unexplained investment - source for the construction amount - Assessing Officer made addition as per the valuation determined by the Department Valuation Officer - appellant has submitted a reason for the purchase of adjoining small piece of land. The land owned by him and on which Hotel Hill View was constructed an unapproved one – Held that:- Construction was done by Mrs. A.K. Singh and there is no evidence brought on record that the construction was done by the assessee. No material evidence was brought on record to prove that the assessee had source for the construction and therefore, no addition is warranted in the hands of the assessee towards cost of construction – addition deleted Issues Involved:1. Deletion of addition made under section 69 as unexplained investment.2. Validity of proceedings under section 153C.Issue-Wise Detailed Analysis:1. Deletion of Addition Made Under Section 69 as Unexplained Investment:The Revenue's primary contention is that the Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 46,63,000/- made under section 69 as unexplained investment in Hotel Hill View. The assessee, a retired Railway Employee, was subjected to a search under section 132, leading to an assessment under section 143(3) read with section 153C, which included the addition based on the valuation determined by the Department Valuation Officer.The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee, holding that there was no evidence that the assessee constructed the building. The construction was attributed to the assessee's son's mother-in-law, Mrs. A.K. Singh, and later bequeathed to the assessee's son's daughter, Dr. Mahalaxmi Prasad.The Revenue argued that the Commissioner did not verify the source of Mrs. A.K. Singh and that the addition was correctly made since the assessee owned the land. However, the Commissioner of Income Tax (Appeals) found that the bills and other evidence indicated that Mrs. A.K. Singh had constructed the building, supported by the builder's sworn statement and proof of Mrs. Singh's financial resources.The Tribunal upheld the Commissioner's findings, noting that the Assessing Officer did not provide material evidence to prove that the assessee had the source for the construction amount. Therefore, the addition of Rs. 46,63,000/- was not warranted in the hands of the assessee.2. Validity of Proceedings Under Section 153C:The assessee challenged the validity of the proceedings under section 153C, arguing that no incriminating material was seized during the search. The Commissioner of Income Tax (Appeals) overruled this objection, stating that the seized materials, including bills and the assessee's pension account, justified the initiation of proceedings under section 153C.The Tribunal agreed with the Commissioner, finding that the proceedings were validly initiated as the seized materials indicated the assessee's involvement. Thus, the additional ground raised by the assessee questioning the validity of the proceedings was rejected.Conclusion:The Tribunal concluded that there was no need to interfere with the Commissioner of Income Tax (Appeals)'s decision to delete the addition made by the Assessing Officer. The construction was done by Mrs. A.K. Singh, and there was no evidence to prove that the assessee had the source for the construction amount. Consequently, the appeal of the Revenue and the Cross Objection of the assessee were dismissed.