2019 (4) TMI 1768 - AT - Income Tax

Tribunal rules in favor of assessee, overturning addition by tax authorities for land purchase

The Tribunal ruled in favor of the assessee, deleting the addition made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). ... Disallowing the additional payments as made to land owners for the purpose of acquiring stock-in-trade - HELD THAT:- We find that the assessee has filed two paper books, one paper book containing the copies of sale deeds of the land purchased by the assessee from the seven parties and the second paper book containing the receipts from sellers for land payments, return and computation of income, profit and loss account, balance sheet and bank statements showing the payment details. After going through these documents, we are convinced that all the payments are made by cheques and therefore the identity and genuineness of the transaction is proved. We find that the assessee’s contention that the assessee has not purchased any other land is also worth considering to accept that the assessee has made the payments to the land owners / vendors over and above the sale consideration recorded in the registered sale deeds. We are of the opinion that the addition ought not to have been made. Accordingly we delete the addition. Issues:Assessee's appeal against CIT(A)'s order for A.Y 2008-09 - Verification of extra amounts paid for land purchase - Disallowance of claimed purchase amounts - Confirmation letters from landowners - Genuineness of cheque payments - Disallowance upheld by CIT(A) - Grounds of appeal - Payments made through cheques - Identity and genuineness of transactions - Deletion of addition.Detailed Analysis:1. Verification of Extra Amounts Paid for Land Purchase:The assessee, engaged in the business of purchase and sale of plots, filed an appeal against the CIT(A)'s order for the assessment year 2008-09. The CIT(A) had set aside the initial assessment order and directed the Assessing Officer (A.O) to verify whether the extra amounts paid by the assessee over the consideration recorded in sale deeds were towards land purchase and if received by the sellers. The A.O observed discrepancies in the claimed purchase amounts and requested confirmation letters from the landowners to verify the actual consideration received by them.2. Disallowance of Claimed Purchase Amounts:The A.O disallowed a significant amount claimed by the assessee towards land purchase, as the assessee failed to provide confirmation letters or produce the parties. The A.O noted that part of the payments were adjusted with other persons, raising doubts on the genuineness of the transactions. The CIT(A) upheld the A.O's decision, leading the assessee to appeal on grounds of erroneous disallowance and non-acceptance of claimed deductions for land payments.3. Genuineness of Cheque Payments and Identity of Transactions:During the appeal, the assessee's counsel argued that all payments were made through cheques, indicating the genuineness of transactions. The counsel emphasized that the payments were solely for land purchase, supported by receipts and cheque payments. The A.O's doubts were refuted based on the documentary evidence provided by the assessee, including sale deeds, receipts, and financial statements.4. Deletion of Addition and Final Decision:After considering the submissions and evidence, the Tribunal found that all payments were made via cheques, establishing the genuineness of the transactions. The Tribunal accepted the assessee's claim that the payments were solely for land purchase, supported by documentary evidence. Consequently, the Tribunal ruled in favor of the assessee, deleting the addition made by the A.O and upheld by the CIT(A), thereby allowing the appeal filed by the assessee for the assessment year 2008-09.This detailed analysis outlines the issues involved in the legal judgment, the arguments presented by both parties, and the final decision of the Tribunal based on the evidence and legal interpretations provided during the proceedings.