Advances from property sales cannot be treated as unexplained income under Section 68 when supported by documentation

ITAT Kolkata ruled in favor of the assessee on multiple grounds. The tribunal held that advances received in preceding years for property sales cannot be treated as unexplained under Section 68 as they appeared as opening balance and were supported by conveyance deeds. Regarding suppressed sales, the tribunal found that actual transactions occurred in preceding years with proper documentation through banking channels, making Section 43CA inapplicable since properties were stock-in-trade, not capital assets. For unexplained investment in property purchase, the tribunal noted the transaction was disclosed through banking channels and no statutory provision existed in AY 2014-15 for additions based on fair market value differences, as Section 56(2)(x)(b) became effective only from 2017-18.

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Issues Involved:
1. Validity of ex-parte order by CIT(A).
2. Addition of Rs. 48,00,000/- under Section 68 for unexplained advance received against booking of flats.
3. Addition of Rs. 53,29,150/- for suppressed sales.
4. Addition of Rs. 44,12,850/- for unexplained investment in immovable property.

Summary:

Issue 1: Validity of Ex-parte Order by CIT(A)
The assessee argued that the ex-parte order passed by the CIT(A) was in contravention of Section 250(6) of the Income Tax Act, 1961, and thus void, ultra vires, and null in law. The Tribunal did not specifically address this issue in the judgment.

Issue 2: Addition of Rs. 48,00,000/- under Section 68
The assessee contended that the advance of Rs. 48,00,000/- received from three parties (Amalendu Barik, Debanjan Chakraborty, and Indumati Panchali) was genuine and received in preceding years. The Tribunal observed that the sums were indeed opening balances from previous years and were genuine transactions for the sale of flats, evidenced by conveyance deeds. Therefore, Section 68 could not be invoked, and the addition was deleted.

Issue 3: Addition of Rs. 53,29,150/- for Suppressed Sales
The assessee explained that the sales transactions were recorded in previous years, and the amounts appearing in the Individual Transaction Statement (ITS) were the values adopted by the stamp valuation authority. The Tribunal found that the actual sale transactions occurred in preceding years, and the sale consideration was received and offered to tax in those years. Since the transactions were genuine and supported by evidence, the addition for suppressed sales was deleted.

Issue 4: Addition of Rs. 44,12,850/- for Unexplained Investment
The assessee argued that the investment in the property was made through a disclosed bank account and the actual purchase consideration was Rs. 7,00,000/-, not Rs. 44,12,850/- as per the stamp valuation authority. The Tribunal noted that the provisions for making additions based on stamp duty valuation were effective from 01/04/2017, and thus not applicable for the Assessment Year 2014-15. Consequently, the addition for unexplained investment was deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting all the additions made by the Assessing Officer and CIT(A). The judgment emphasized the genuineness of transactions and the proper application of relevant provisions of the Income Tax Act.

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