2025 (4) TMI 157 - AT - Income Tax

Property Payments Made in AY 2012-13 Cannot Be Taxed in AY 2014-15 Under Sections 69 and 56(2)(vii)

Yasmin Ara, L/h Md. Ayaz Versus ITO, Ward 25 (1), Kolkata

The ITAT allowed the appeal, setting aside additions made under Sections 69 and 56(2)(vii) of the Income Tax Act. The AO had incorrectly assumed the ... Addition u/s 69 and u/s 56(2)(vii) - Addition u/s 69 on account of unexplained investments in the property and u/s 56(2)(vii) on the ground that the stamp value of the property was more than the agreement value - whether payment for the impugned property was made in the preceding/earlier assessment year? HELD THAT:- The property was purchased in the earlier assessment year for which the consideration was also fully discharged as stated hereinabove in the schedule of payments and it is only conveyance deed which is registered during the year in favour of the assessee and his wife. We note that the issue was accepted by the revenue in the case of assessee’s husband. Additions were wrongly made by the AO on the wrong understanding of the facts that the property was purchased during the instant financial year, whereas as a matter of fact the property was purchased in the earlier assessment year and the payments were also made in the earlier assessment year. We note that assessee has duly disclosed all these payments made for the property in the return of income filed and also that all these payments were made from the banks of the assessee. Before parting we would like to state that though the proceedings were ex-parte before the authorities below. However, considering the open and shut case, we are inclined not to restore this file to the file of the ld. AO or ld. CIT (A) and is being decided at this stage. Accordingly, the order of appellate authority is set aside and the AO is directed to delete the addition. Appeal of the assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment were:Whether the additions made by the Assessing Officer (AO) under Section 69 and Section 56(2)(vii) of the Income Tax Act were justified, given the facts that the payment for the property was made in an earlier assessment year.Whether the assessment proceedings conducted in the name of a deceased person were valid.ISSUE-WISE DETAILED ANALYSIS1. Additions under Section 69 and Section 56(2)(vii) of the Income Tax ActRelevant legal framework and precedents: Section 69 of the Income Tax Act deals with unexplained investments, and Section 56(2)(vii) pertains to income from other sources, specifically addressing discrepancies between the stamp value and the agreement value of a property.Court's interpretation and reasoning: The Tribunal noted that the payments for the property were made in the Assessment Year (AY) 2012-13, as evidenced by the schedule of payments annexed to the indenture dated 11th April 2013. The conveyance deed was registered in the AY 2014-15, which led to the misunderstanding by the AO that the property was purchased in the latter year.Key evidence and findings: The Tribunal examined the schedule of payments, which clearly indicated that all payments aggregating to Rs. 77,40,000/- were made in AY 2012-13. This evidence was crucial in establishing that the property was not purchased in AY 2014-15, contrary to the AO's assumption.Application of law to facts: The Tribunal applied the legal provisions of Sections 69 and 56(2)(vii) to the established facts, concluding that the additions were based on a misinterpretation of the timing of the property purchase and the associated payments.Treatment of competing arguments: The Tribunal considered the Revenue's position but found it to be based on an incorrect understanding of the facts. The Tribunal also noted that similar issues had been accepted by the Revenue in the case of the assessee's husband.Conclusions: The Tribunal concluded that the additions under Sections 69 and 56(2)(vii) were wrongly made and directed the AO to delete the additions.2. Validity of Proceedings in the Name of a Deceased PersonRelevant legal framework and precedents: Legal proceedings conducted in the name of a deceased person are typically considered invalid unless corrected by substituting the legal heirs.Court's interpretation and reasoning: The Tribunal observed that the assessment was framed in the name of a deceased person, as the assessee had expired on 15.08.2020, and this fact was not reported to the AO. Consequently, the proceedings were flawed from the outset.Key evidence and findings: The Tribunal noted that the assessment and appellate proceedings remained unattended, which further compounded the procedural irregularity.Application of law to facts: The Tribunal recognized the procedural defect in conducting proceedings in the name of a deceased individual, which undermined the validity of the assessment.Treatment of competing arguments: The Tribunal did not find any substantial competing arguments from the Revenue that could justify the continuation of proceedings in the name of a deceased person.Conclusions: The Tribunal implicitly acknowledged the procedural defect but focused on resolving the substantive issue regarding the additions, ultimately setting aside the appellate authority's order.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'We are of the considered view that the additions were wrongly made by the AO on the wrong understanding of the facts that the property was purchased during the instant financial year, whereas as a matter of fact the property was purchased in the earlier assessment year and the payments were also made in the earlier assessment year.'Core principles established: The Tribunal established that for tax purposes, the timing of property transactions should be based on the actual date of payment and not merely on the date of registration of the conveyance deed. Additionally, proceedings conducted in the name of a deceased individual are procedurally defective.Final determinations on each issue: The Tribunal directed the AO to delete the additions made under Sections 69 and 56(2)(vii) and set aside the order of the appellate authority. The appeal was allowed, and the other grounds raised by the assessee were left open for future consideration if necessary.