2019 (5) TMI 1924 - AT - Income Tax

Tribunal upholds notice validity under Income Tax Act but overturns addition under Section 69B

The Tribunal upheld the validity of the notice issued under Section 148 of the Income Tax Act, finding that the reasons recorded by the Assessing Officer ... Reopening of assessment u/s 147 - addition invoking provisions of s. 69B in respect of alleged cash payment for purchase of Land - HELD THAT:- We observe that explanation 2(b) of Section 147 of the Act which deals with the cases where income chargeable to tax is deemed to be escaped for assessment, applies on the given facts which provides that “where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Ld. A.O that the assessee has under stated the income or has claimed excessive loss, deduction, allowance or relief in the return”. Same is the situation in the case of the assessee wherein the Ld. A.O received the information which indicated that the assessee has understated income or has not disclosed the investment properly. These reasons was sufficient to apply the above provisions on the assessee alleging that he has not declared proper income or investment and escaped the tax assessment. Therefore in our considered view Ld. A.O has rightly issued the notice u/s 148 of the Act to frame the reassessment in the case of the assessee - We therefore find no reason to interfere in the finding of Ld. CIT(A) and dismiss assessee’s Ground No.1. Addition u/s 69B - Addition will not stand for under the provisions of Section 69B of the Act, firstly because the alleged land is not purchased by the assessee but is purchased in the name of another assessee namely Natural Gadia Real Estate Pvt. Ltd and secondly the assessee who is earning income from salary, house property and income from other sources is not maintaining any books of accounts and for making any addition u/s 69B of the Act there should be specific finding by Ld. A.O that the investment made by the assessee exceeds the amount recorded in the books of accounts maintained by the assessee for any source of income and the assessee offers no explanation about such excess amount or the explanation offered by the assessee is not, in the opinion of the A.O, satisfactory. In the instant case the assessee is not maintaining any books of accounts nor the land in question is purchased by him. Even otherwise the amount of investment in land shown by Natural Gadia Real Estate Pvt. Ltd is duly supported by various documentary evidences referred above and payment made through account payee cheque duly mentioned in the registered sale deeds. Both the lower authorities erred in confirming the addition by wrongly invoking provisions of Section 69B of the Act, as the alleged transaction of sale of land by two sellers to the buyer M/s. Natural Gadia Real Estate Pvt. Ltd was entered into at a consideration of ₹ 95,00,000/- only and no corroborative evidence is placed on record by the revenue authorities as well as Ld. Departmental Representative which could prove that “on money” was paid over and above the stated sale consideration in the registered sale deed. We, therefore set aside the finding of Ld. CIT(A) and delete the addition made in the hands of the assessee by Ld. A.O u/s 69B - Decided in favour of assessee partly. Issues Involved:1. Validity of notice under Section 148 of the Income Tax Act, 1961.2. Addition of Rs. 1,75,00,000/- under Section 69B of the Income Tax Act, 1961, based on alleged cash payment for land purchase.Issue-Wise Detailed Analysis:1. Validity of notice under Section 148 of the Income Tax Act, 1961:The assessee challenged the issuance of notice under Section 148, arguing that the reopening of the assessment was not justified. The Tribunal observed that the assessee filed a return declaring an income of Rs. 1,58,290/-, which was processed without scrutiny. The Assessing Officer (AO) received information from the ADIT (Investigation) regarding cash deposits of Rs. 1,82,00,000/- in the bank accounts of two individuals, who claimed that Rs. 1,75,00,000/- was received as cash payment for land sold to a company where the assessee was a director. The AO issued a notice under Section 148 to reassess the income, which the CIT(A) upheld, stating the reasons were adequate and based on relevant facts. The Tribunal held that the AO rightly issued the notice under Section 148, as the reasons recorded indicated that the assessee might have understated income or not disclosed investments properly. Therefore, the Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed the assessee's ground challenging the validity of the notice under Section 148.2. Addition of Rs. 1,75,00,000/- under Section 69B of the Income Tax Act, 1961:The assessee contested the addition of Rs. 1,75,00,000/- made by the AO under Section 69B, which was based on the statements of the land sellers who claimed to have received this amount in cash over and above the registered sale consideration of Rs. 95,00,000/-. The Tribunal noted that the sale transaction was supported by multiple documentary evidences, including registered sale agreements, affidavits, public notices, and bank statements, all indicating a sale consideration of Rs. 95,00,000/-. The Tribunal found that the AO relied solely on the sellers' statements without conducting an independent valuation of the land to substantiate the claim of a higher sale consideration.The Tribunal referred to several judicial precedents, including the judgments of the Hon'ble Gujarat High Court in Pr. CIT vs. Vivek Prahlad Bhai Patel and the Hon'ble Madras High Court in CIT vs. P.V. Kalyanasundaram, which emphasized that the burden of proving actual consideration lies with the revenue authorities. The Tribunal observed that the documentary evidence provided by the assessee outweighed the oral statements of the sellers, and the revenue failed to bring any credible material to prove that the sale consideration was Rs. 2,70,00,000/- instead of Rs. 95,00,000/-. The Tribunal also noted that the provisions of Section 69B were not applicable as the assessee was not maintaining any books of accounts, and the land was purchased by a company, not the assessee personally.Consequently, the Tribunal held that both lower authorities erred in confirming the addition of Rs. 1,75,00,000/- under Section 69B, and the addition was deleted. The appeal was partly allowed in favor of the assessee.