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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) Whether reassessment under section 147 of the Income-tax Act, 1961 was justified on the basis of information regarding alleged unexplained investment; (ii) Whether addition made towards investment in immovable property could be sustained when the assessee explained the source through repayment of advance received under an unregistered agreement to sell.
Issue (i): Whether reassessment under section 147 of the Income-tax Act, 1961 was justified on the basis of information regarding alleged unexplained investment.
Analysis: The record showed specific information before the Assessing Officer that the assessee had purchased an immovable property and had a share in the transaction. On that basis, the Assessing Officer formed a prima facie view of escapement of income and reopened the assessment. The reassessment was therefore supported by material indicating possible escapement of income.
Conclusion: The reopening of assessment was upheld.
Issue (ii): Whether addition made towards investment in immovable property could be sustained when the assessee explained the source through repayment of advance received under an unregistered agreement to sell.
Analysis: The assessee produced an unregistered agreement to sell showing receipt of advance and also placed sale deeds to show repayment of the advance out of sale proceeds of other properties. The absence of registration by itself did not render the agreement void or incapable of being relied upon for the limited purpose of explaining the source of funds. The agreement was treated as acted upon and the explanation for the repayment was found credible. The addition was therefore not sustainable on merits.
Conclusion: The addition was deleted and the assessee's explanation was accepted.
Final Conclusion: The reassessment survived, but the impugned addition was set aside because the source of the investment stood explained.
Ratio Decidendi: An unregistered agreement to sell cannot be discarded solely for want of registration when it is otherwise shown to have been acted upon and is relevant to explain the source of funds; reassessment may stand on prima facie escapement even if the resultant addition fails on merits.
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