Tribunal sets aside order, remands for verification, directs AO to provide material, opportunity for assessee.

The tribunal set aside the impugned order and remanded the matter to the Assessing Officer for further verification, directing the AO to furnish the material collected to the assessee and provide a reasonable opportunity for the assessee to present her case. Both appeals were allowed for statistical purposes.

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Issues Involved:
1. Applicability of Section 68 of the Income Tax Act.
2. Verification of the genuineness, creditworthiness, and identity of M/s Pranav Sports Academy Pvt. Ltd.
3. Alleged violation of the principles of natural justice.
4. Appropriate treatment of the forfeited advance amount under the Income Tax Act.

Detailed Analysis:

1. Applicability of Section 68 of the Income Tax Act:

The assessee contended that Section 68 of the Act, which deals with unexplained cash credits, had no application in this case because the income was derived from salary and house property, not from business, and no books of account were maintained. The tribunal agreed, noting that Section 68 applies to sums found credited in the books of the assessee maintained for the previous year, which was not applicable here. The tribunal also noted that Section 69, which deals with unexplained investments, was not applicable as the necessary ingredients for its applicability were missing. The tribunal found strength in the argument that Section 51, which deals with advance money received and retained upon the failure of negotiations for the transfer of a capital asset, was the appropriate provision, and the assessee had complied with it.

2. Verification of the genuineness, creditworthiness, and identity of M/s Pranav Sports Academy Pvt. Ltd.:

The Principal Commissioner of Income-tax (PCIT) had directed the Assessing Officer (A.O.) to verify the genuineness, creditworthiness, and identity of M/s Pranav Sports Academy Pvt. Ltd., which had allegedly paid the forfeited advance amount. The A.O. conducted an inquiry and concluded that M/s Pranav Sports Academy was a bogus company based on a report from an Income-tax Inspector. The tribunal noted that the A.O. did not confront the assessee with the evidence collected, including the financials of M/s Pranav Sports Academy and the Inspector's report, thereby violating the principles of natural justice.

3. Alleged violation of the principles of natural justice:

The assessee argued that the A.O. violated the principles of natural justice by relying on evidence collected behind the assessee's back without providing an opportunity to respond. The tribunal agreed, emphasizing that the material gathered should have been shared with the assessee to allow for a fair opportunity to explain. The tribunal found that the A.O.'s conclusions were based on material not disclosed to the assessee, leading to a violation of natural justice.

4. Appropriate treatment of the forfeited advance amount under the Income Tax Act:

The tribunal observed that the assessee had declared the entire sale consideration, including the forfeited advance amount, in the computation of income. The Revenue's concern was that the assessee might have routed unaccounted money through this transaction. The tribunal found that the entire transaction, including the forfeiture of the advance and the subsequent sale at a lower price, raised suspicions. However, it noted that the Revenue had inconsistently accepted the transaction in the hands of the assessee's husband while disputing it for the assessee. The tribunal concluded that the matter required further verification by the A.O. after providing the assessee with the material collected and allowing an opportunity to respond.

Conclusion:

The tribunal set aside the impugned order and remanded the matter to the A.O. for further verification, directing the A.O. to furnish the material collected to the assessee and provide a reasonable opportunity for the assessee to present her case. Both appeals were allowed for statistical purposes. The decision was pronounced on November 13, 2018.

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