2022 (5) TMI 1401 - AT - Income Tax

Tribunal confirms tax assessment, criticizes Revenue's verification process

The Tribunal upheld the validity of the assessment under Section 143(3) read with Section 147 of the Income Tax Act, dismissing the technical challenge ... Validity of the assessment framed under section 143(3) read with section 147 - HELD THAT:- The assessee in the case on hand has filed the belated return under section 139(4) dated 31st March 2013 after the expiring of the time of filing the return of income provided under section 139(1) i.e. July 2012 - the time-limit for issuing notice u/s 143(2) was to be reckoned from the end of the year in which the return of income was furnished by the assessee. Consequently, the time-limit available to the AO for issuing notice under section 143(2) of the Act was to 30th September 2013. But the AO has not issued any notice till the time provided u/s 143(2) - Thus the notice was rightly issued within the provisions of law as provided under sections 148 r.w.s. 149 - Accordingly we disagree with the contention of the learned AR of the assessee and hence dismiss the technical ground raised by the assessee. Addition u/s 69 - assessee has made investment in the property for Rs. 50 lakh and stamp value of the property was of Rs. 57,06,000/- but the assessee failed to justify the source of investment in such property - HELD THAT:- As merely in the absence of sales bills, expenditure details etc., the income in the hands of the family members of the assessee cannot be rejected. Likewise, the certificates issued by the gram panchayat have been rejected by the learned CIT (A) merely by assuming them as afterthought - these are the documents which have been issued by the government departments/ authorities such department of land revenue local authority i.e. gram panchayat which cannot be rejected without carrying out the necessary verification and bringing contrary materials on record. The revenue has been given a lot of powers under the statute to discharge their responsibilities in effective manner so that the correct income should be brought to tax. Besides this, there are various supporting staff available with the income tax authorities such as inspector of income tax, tax recovery officer etc. But, the lower authorities despite having so many powers have rejected details furnished by the assessee on their face value - AO and learned CIT (A) was under the obligation of carrying out the necessary verification before rejecting the documents furnished by the assessee based on cogent reasons. Admittedly, the additional documents furnished by the assessee under rule 46A can be accepted by the CIT (A) only in the situations provided therein. In other words under the specific circumstances the learned CIT (A) was empowered to accept the additional evidences - In the present case, we find that the CIT (A) has called for the remand report and deleted the addition made by the AO in part which evidences that the learned CIT (A) has admitted the additional evidences - CIT (A) cannot reject the other additional documents filed by the assessee in piecemeal - CIT (A) either was to accept the additional documents in totality or reject the same in totality. As such he cannot pick and choose documents for the admission of additional evidences. Thus, once initial documents have admitted by the learned CIT (A) and remand report has been called upon from the AO, then the same cannot be rejected without any cogent reasons and conducting necessary enquiries. The revenue being a tax authority having a lot of resources in terms of manpower and judicial powers under the provisions of Act but failed to exercise them. Thus the Revenue shall not be given another opportunity for conducting necessary enquiries. We are not inclined to uphold the findings of the authorities below. Accordingly, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Issues Involved:1. Validity of assessment framed under section 143(3) read with section 147 of the Income Tax Act.2. Addition of Rs. 57,00,000 under section 69 for the purchase of agricultural land.3. Consideration of additional evidence furnished by the assessee.4. Source of investment in agricultural land.5. Delay in receiving the order of CIT(A) due to change in address.Issue-wise Detailed Analysis:1. Validity of Assessment under Section 143(3) r.w.s. 147:The assessee challenged the validity of the assessment framed under section 143(3) read with section 147 of the Act, arguing that the time-limit for issuing notice under section 143(2) was available but the AO issued a notice under section 148 for escapement of income. The Revenue countered that the time-limit for issuing notice under section 143(2) expired in September 2013, and the notice under section 148 was issued in February 2014, within the legal timeframe. The Tribunal concluded that the notice under section 148 was rightly issued within the provisions of sections 148 r.w.s. 149, dismissing the technical ground raised by the assessee.2. Addition of Rs. 57,00,000 under Section 69:The AO found that the assessee made investments in two immovable properties totaling Rs. 1,14,12,000 but failed to justify the source of investments. The assessee contended that he only invested in one property valued at Rs. 57,06,000, financed by family savings from agricultural income. The CIT(A) confirmed the addition for Rs. 57,00,000, rejecting the additional evidence provided by the assessee regarding the source of funds.3. Consideration of Additional Evidence:The assessee argued that the CIT(A) erred in not considering the additional evidence explaining the source of investment, violating Rule 46A. The CIT(A) rejected the additional evidence, stating it was prepared afterthought and lacked supporting documents like sale bills of agricultural products and expense details. The Tribunal found that the CIT(A) should have either accepted or rejected the additional documents in totality and criticized the Revenue for not conducting necessary verification.4. Source of Investment in Agricultural Land:The assessee claimed the investment was financed by family members' agricultural income, supported by documents like Form 7/12, 8 ledgers, and certificates from the gram panchayat. The CIT(A) dismissed these claims, citing the lack of evidence for agricultural income and the mode of loan transactions. The Tribunal, however, acknowledged the documentary evidence and criticized the Revenue for not verifying the details. It directed the AO to delete the addition, emphasizing the need for thorough verification before rejecting the documents.5. Delay in Receiving Order of CIT(A):The assessee requested condonation for a 12-day delay in receiving the CIT(A) order due to a change in address. The Tribunal did not explicitly address this issue in the judgment.Conclusion:The Tribunal partly allowed the appeal, directing the AO to delete the addition of Rs. 57,00,000 and criticizing the Revenue for not conducting necessary verifications. The Tribunal emphasized the importance of considering all additional evidence and carrying out thorough investigations before rejecting claims.