2021 (11) TMI 100 - AT - Income Tax

Tribunal rules in favor of taxpayer, finding revenue authorities lacked evidence in land purchase case

Shri Narendra Lakhi Versus The DCIT, Central Circle-3, Jaipur.

Shri Narendra Lakhi Versus The DCIT, Central Circle-3, Jaipur. - TMI Issues:1. Addition of unexplained investment for the purchase of land.2. Burden of proof on the taxpayer for unexplained investment.3. Dispute regarding the transaction due to family disputes of the seller.4. Treatment of balance payment as unaccounted expenditure.5. Consideration of additional evidence regarding property dispute.6. Justification of addition based on presumption without evidence.Analysis:1. Addition of Unexplained Investment for the Purchase of Land:The dispute in the appeal revolves around the addition made by the Assessing Officer (AO) for unexplained investment in the purchase of land based on an agreement found during a search and seizure action. The AO considered a balance payment of Rs. 54,50,000 as unaccounted expenditure for the year under consideration. The taxpayer contested this addition, arguing that the transaction was not materialized due to family disputes of the seller, and no evidence existed to prove the payment. The ld. CIT(A) upheld the AO's decision, leading to the appeal before the tribunal.2. Burden of Proof on the Taxpayer for Unexplained Investment:The taxpayer, through the ld. AR, emphasized that the burden to prove unexplained investment lies with the party alleging it, in this case, the revenue authorities. They argued that no evidence was presented to establish that the alleged payment of Rs. 54,50,000 was made during the relevant year. Citing legal precedents, the taxpayer contended that the addition was unjustified as it lacked concrete proof of the investment.3. Dispute Regarding the Transaction Due to Family Disputes of the Seller:The taxpayer explained that family disputes of the seller prevented the transaction from materializing fully, and no payment beyond the initial amount was made. This aspect was crucial in understanding why the balance payment was not completed, and the taxpayer maintained that without evidence of such payment, the addition was unwarranted.4. Treatment of Balance Payment as Unaccounted Expenditure:The AO treated the balance payment as unaccounted expenditure, presuming it was made during the relevant year. However, the taxpayer argued that without concrete proof of payment and considering the unresolved nature of the transaction, such treatment was incorrect. The tribunal noted the lack of evidence to support the addition and subsequently ruled in favor of the taxpayer.5. Consideration of Additional Evidence Regarding Property Dispute:The ld. AR presented additional evidence regarding a property dispute involving the deceased owner of the land, highlighting the complexities surrounding the transaction. This evidence further supported the taxpayer's contention that the transaction was hindered due to unresolved issues, reinforcing the argument against the addition of unexplained investment.6. Justification of Addition Based on Presumption Without Evidence:The tribunal emphasized that the addition made by the AO was solely based on presumption and lacked substantial evidence to validate the unexplained investment. The tribunal ruled that without concrete proof of the alleged payment and in the absence of any material to support the addition, the presumption alone was insufficient to justify the addition. Consequently, the tribunal decided in favor of the taxpayer and deleted the addition.This comprehensive analysis of the judgment highlights the key issues, arguments presented, and the tribunal's decision, providing a detailed understanding of the legal intricacies involved in the case.