Tribunal upholds CIT(A)'s decision, deletes addition under Section 56(2)(vii)(b) due to lack of evidence

The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decisions. The addition under Section 56(2)(vii)(b) was deleted due to lack of concrete evidence of unaccounted cash payments. Deemed rental income was recalculated based on the CIT(A)'s directions, with one unit considered self-occupied. The Tribunal's decision was pronounced on 01st March 2023.

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Issues Involved:
1. Applicability of Section 56(2)(vii)(b) of the Income Tax Act.
2. Assessment of deemed rental income from house property.

Issue 1: Applicability of Section 56(2)(vii)(b) of the Income Tax Act
The primary issue was whether the provisions of Section 56(2)(vii)(b) of the Income Tax Act were applicable to the transaction of purchasing immovable property and if the addition made by the Assessing Officer (AO) under this section was justified. The AO contended that the sale agreement was a colorable device to evade taxes, as the assessee took possession of the property after paying only Rs. 1,00,000, while the total sale consideration was Rs. 2,17,00,000. The AO added the balance amount of Rs. 2,16,00,000 as income under Section 56(2)(vii)(b), suspecting it was paid in unaccounted cash.

The CIT(A) deleted the addition, noting that the assessee had a business connection with the developer and had subsequently paid the balance amount. The Third Member agreed with the CIT(A), emphasizing that suspicion alone cannot replace proof, and the AO failed to provide concrete evidence of unaccounted cash payments. The majority opinion held that the addition under Section 56(2)(vii)(b) was to be deleted, favoring the assessee.

Issue 2: Assessment of Deemed Rental Income from House Property
The AO also added Rs. 15,12,000 as deemed rental income from the property, based on a Leave and Licence agreement. The CIT(A) partly upheld this addition, allowing one unit as self-occupied and calculating deemed rent for the remaining units for nine months.

The Third Member's order noted that the AO's assessment of deemed rental income was based on the agreement, but the CIT(A) provided partial relief by considering one unit as self-occupied. The final decision confirmed the CIT(A)'s approach to calculating deemed rent for the remaining units.

Conclusion
The Tribunal concluded by dismissing both the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decisions on both issues. The order pronounced on 01st March 2023, confirmed that the addition under Section 56(2)(vii)(b) was to be deleted, and the deemed rental income was to be recalculated as per the CIT(A)'s directions.

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