2015 (8) TMI 565 - HC - Income Tax

Court upholds deletion of Rs. 50 lakhs addition for property purchase. Revenue must verify claims thoroughly.

PR Commissioner of Income Tax-21 Versus Om Prakash Aggarwal

The High Court dismissed the appeal, upholding the decision of the CIT (A) and ITAT to delete the addition of Rs. 50 lakhs made by the AO without proper ... Assessment u/s 153A - addition towards purchase of property made on the basis of slips recovered during the search - ITAT held that as far as the addition of ₹ 37,80,000 was concerned, since the Assessee had admitted to having paid for the property at ₹ 13,000 per sq.ft but not out of the books, it was 'just and proper to restore the issue to the file of AO to afford an opportunity of hearing for the Assessee to explain the detail of the investment before the AO substantiating the fact that the Assessee had actually paid purchase consideration @ 13000 per sq ft for the property of 540 sq.ft - As regards the addition of ₹ 50 lakhs the ITAT found no perversity in the order of the CIT (A) to held that once the Assess had offered an explanation, the AO ought to have conducted an inquiry and undertaken verification of the properties - Held that:- Appellant was unable to point out why the direction of the ITAT remanding the matter of addition of ₹ 37,80,000 to the AO for affording an opportunity to the Assessee to explain the details should be interfered with. She urged that even in respect of the addition of ₹ 50 lakhs a similar direction ought to have been issued. The Court is unable to agree. The second addition of ₹ 50 lakhs stood on a different footing. As is evident from the concurrent orders of the CIT (A) and the ITAT, the said addition was indeed made by the AO purely on surmises without any inquiry whatsoever. The said addition was rightly directed to be deleted. - Decided against revenue. Issues:1. Appeal against ITAT judgment regarding additions made by AO in assessment.2. Addition of undisclosed amounts towards property purchase.3. Explanation provided by Assessee for additions.4. Decision of CIT (A) and ITAT on additions.5. Direction by ITAT to AO for further inquiry.6. Dismissal of appeal by High Court.Analysis:1. The appeal by the Revenue under Section 260A of the Income Tax Act, 1961 was directed against the judgment passed by the Income Tax Appellate Tribunal (ITAT) in relation to the Assessment Year 2008-09.2. A search and seizure operation under Section 132 of the Act was carried out, leading to additions made by the Assessing Officer (AO) in the total income of the Assessee based on undisclosed amounts paid towards property purchase.3. The Commissioner of Income Tax (Appeals) partly allowed the Assessee's appeal, considering the explanation provided regarding the payments made for property acquisition and the nature of the entries in the recovered documents.4. The CIT (A) held that the onus shifted to the Revenue to establish the falsity of the Assessee's claims, emphasizing the need for verification of properties to ascertain the truth.5. The ITAT directed the AO to allow the Assessee an opportunity to explain the details of the investment for the property purchase, specifically addressing the issue of payments made out of the books.6. The High Court dismissed the appeal, noting that the addition of Rs. 50 lakhs was made by the AO without any inquiry, based solely on surmises, leading to the deletion of this addition by the CIT (A) and the ITAT.