Land purchase addition deleted when payment delayed due to disputes under section 69

ITAT Ahmedabad allowed the appeal, deleting the addition made under section 69. The assessee purchased land through registered sale deed but paid consideration later due to disputes. AO and CIT(A) made addition solely because payment wasn't disclosed at time of purchase. ITAT held that section 69 applies only when actual expenditure is incurred and source unexplained. Since no evidence showed cash expenditure was actually incurred for land purchase, and delayed payment had justifiable reasons, the deeming provisions couldn't apply. Addition deleted in assessee's favor.

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Issues Involved:
1. Confirmation of addition of Rs. 95,47,000/- under Section 69 of the Income Tax Act, 1961.

Summary:

Issue 1: Confirmation of Addition under Section 69 of the Act

The captioned appeal was filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad, arising from the assessment order passed under Section 143(3) of the Income Tax Act, 1961, relevant to the Assessment Year 2015-2016.

The only effective issue raised by the assessee was that the learned CIT(A) erred in confirming the addition of Rs. 95,47,000/- under Section 69 of the Act. The assessee, a private company, engaged in wholesale trading of vegetables, was found by the AO to have purchased two immovable properties for Rs. 95,47,000/-, which were not disclosed in the books of accounts. The AO, after verification, concluded that the consideration was paid from unaccounted sources and made an addition of Rs. 95,47,000/- on account of unaccounted income used for the purchase of the land property.

The assessee contended before the learned CIT(A) that the lands purchased through the sale deed were not disclosed in the books as the consideration was not paid due to a dispute. The payment was made after the assessment order through RTGS on 29th March 2018. The learned CIT(A), however, confirmed the addition made by the AO, observing that the appellant's arguments appeared to be an afterthought.

Upon appeal, the assessee argued that there was a long-standing business relationship between the assessee group and the vendors, and the payment for the land was delayed but eventually made through the banking channel. The assessee emphasized that no unaccounted investment was made and no documentary evidence suggested that payment was made in cash.

The Tribunal noted that the land was purchased through a sale deed, and payment was subsequently made, which deviated from standard market practices but could be justified by the long-standing business relationship between the parties. The Tribunal also referenced the judgment of the Hon'ble High Court of Gujarat in the case of Commissioner of Income Tax versus Shri Babul Harivadan Parikh, which upheld that suspicion cannot replace legal proof.

The Tribunal concluded that there was no documentary evidence to suggest that the assessee incurred expenses in cash for the land purchase, and thus, the provisions of Section 69 of the Act could not be applied. Consequently, the Tribunal directed the AO to delete the addition of Rs. 95,47,000/-. The appeal filed by the assessee was allowed.

Order pronounced in the Court on 14/02/2024 at Ahmedabad.

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