WASEEM MOHAMMED,HYDERABAD vs. DCIT, CENTRAL CIRCLE- 3(3), HYDERABAD

The brief facts of the case are that, the assessee is a partner of M/s. National Egg Store, filed his original return of income under Section 139(1) of the Income Tax Act, 1961 for the assessment year 2022-23 and declared a total income of Rs. 14,17,790/-. A search and seizure operation under Section 132 of the Act, was conducted on 15.03.2023 in the case of M/s. Grace Services Society Group and M/s. National Egg Store. During the course of search at the residence of the assessee, an agreement of sale-cum-GPA dated 15.01.2022 was found and as per the seized document, the assessee has agreed to purchase land admeasuring 1454 sq. yards in Plot No. 195, Survey Nos. 245, 309, 310 and 311 at Jeedimetla Village, Quthbullapur Mandal, Medchal-Malkajgiri District for Rs. 1,30,86,000/-, out of which an amount of Rs. 31,86,000/- was paid in cash to the seller, Mohammad Abdul Bari. The assessee has purchased the above property vide sale deed dated 31.03.2022 for a consideration of Rs. 1,77,39,000/-. During the course of search, a sworn statement under Section 132(4) of the Act, was recorded from the assessee and in answer to Question No. 24, dated 16.03.2023, the assessee deposed that the initial agreement entered with the vendor, Mohammad Abdul Bari, was for Rs. 1,30,86,000/-. However, between the agreement date and sale deed date, the SRO value of the property was increased and hence, the property was registered at the SRO value of Rs. 1,77,39,000/-. Further, the assessee has admitted the payment of Rs. 31,86,000/- in cash for purchase of the property.

Consequent to the search, the case was reopened and notice under Section 148 of the Act, dated 30.10.2023 was issued and served on the assessee. The assessee did not file return of income in response to the notice issued under Section 148 of the Act, and therefore, notice under Section 142(1) of the Act, dated 24.06.2024 along with detailed questionnaire calling for certain information, was issued and served on the assessee. In response, the assessee has furnished computation of total income, bank account statement and copy of agreement of sale-cum-GPA, etc. The A.O., after considering the relevant submissions of the assessee and also taking note of the material available on record, observed that, the assessee has paid a sum of Rs. 31,86,000/- in cash for purchase of the property. However, failed to explain the source for the said cash payment. Therefore, made addition of Rs. 31,86,000/- as unexplained investment under Section 69 of the Act, and taxed under Section 115BBE of the Income Tax Act, 1961. 4, Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that, he has purchased the property and also paid a sum of Rs. 31,86,000/- as specified in the sale agreement and the source for the said cash payment is out of drawings from the partnership firm, M/s. National Egg Store, where the assessee was a partner. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of admission of the assessee for cash payment of Rs. 31,86,000/- for purchase of property, held that, although the assessee claims to have sourced the cash payment out of drawings from M/s. National Egg Store on three occasions, but except filing ledger extract, the assessee has not filed any further details, including the partner’s capital account and current account as on 31.03.2022, reflecting the drawings made by the assessee. Further, the assessee also could not produce the partnership accounts and relevant cash books of the partnership firm to show that the cash was made available to the partners. The Ld. CIT(A) further noted that, the assessee at one stage claimed that, the cash payment referred to in the sale agreement-cum-GPA was paid through bearer cheque and finally claimed that, the above payment was made out of cash drawn from the partnership firm. Therefore, the Ld. CIT(A) observed that, the assessee has failed to explain the known source of income to explain cash payment of Rs. 31,86,000/- made for purchase of property. Therefore, the Ld. CIT(A) rejected the explanation of the assessee and upheld the additions made by the A.O.

Aggrieved by the order, the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri H. Srinivasulu, Advocate, submitted that, the Ld. CIT(A) erred in sustaining the addition made by the A.O. towards cash payment of Rs. 31,86,000/-, even though the assessee has explained the cash payment out of drawings from M/s. National Egg Store on different dates. The learned counsel for the assessee, further referring to the cash book of M/s. National Egg Store, submitted that the assessee has drawn Rs. 12,00,000/- on 30.11.2021 and Rs. 11,00,000/- on 11.12.2021 and further, an amount of Rs. 9,00,000/- on 01.01.2022, aggregating to Rs. 32,00,000/-. The above cash drawings were used for making payment to the seller and the same has been recorded in the sale agreement-cum-GPA. These evidences are furnished before the A.O. However, without considering the relevant evidences, the A.O. simply made addition towards cash payment as unexplained investment under Section 69 of the Income Tax Act, 1961. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Therefore, he submitted that, the addition made by the A.O. should be deleted.

The learned Senior A.R. for the Revenue, Dr. Sachin Kumar, on the other hand, supporting the order of the Ld. CIT(A), submitted that, except making a bald claim of drawings of Rs. 31,86,000/- from the partnership firm and filing copy of the ledger account, the assessee failed to file relevant cash books of the partnership firm to prove the availability of cash in the books of accounts of the partnership firm. In the absence of relevant evidence, the A.O. and the Ld. CIT(A) have rightly recorded that the assessee failed to explain the source of cash payment of Rs. 31,86,000/- for purchase of the property. Therefore, he submitted that, the addition made by the A.O. should be upheld.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has agreed to purchase the property by an agreement of sale-cum-GPA dated 15.01.2022 for Rs. 1,30,86,000/-, out of which Rs. 31,86,000/- was paid in cash. It is also an admitted fact that the assessee has explained the cash payment for purchase of the property out of drawings from the partnership firm and this fact has been explained even during the course of search proceedings in the statement recorded under Section 132(4) of the Act. The A.O. made addition towards cash payment under Section 69 of the Act, as unexplained investment on the ground that the assessee has failed to explain the source for cash payment for purchase of the property. Although, the Ld. CIT(A) admitted the fact that the assessee claims to have made payment out of cash from M/s. National Egg Store, Hyderabad, but rejected the explanation of the assessee on the ground that, except making a claim and filing copy of ledger account of partnership firm account, the assessee could not file further evidence, including proof of availability of cash in hand of the partnership firm at the relevant point of time. Except this observation, the A.O. and the Ld. CIT(A) never disputed the fact that the cash payment of Rs. 31,86,000/- was recorded in the sale agreement-cum-GPA and the same was part of the final sale deed executed for purchase of the property vide sale deed dated 31.03.2022. The assessee has furnished the financial statements of the partnership firm i.e., M/s. National Egg Store along with copy of partner’s capital account and the cash book of the partnership firm from 15.11.2021 to 02.01.2022. As per the cash book of the partnership firm, the assessee has drawn a sum of Rs. 12,00,000/- on 30.11.2021 and Rs. 11,00,000/- on 11.12.2021 and further an amount of Rs. 9,00,000/- on 01.01.2022. Further, the partnership firm was having sufficient cash in hand as per the evidences furnished by the assessee. Since the assessee has explained the source for cash payment of Rs. 31,86,000/- for purchase of the property and the same has been recorded in the books of accounts of the partnership firm, in our considered view, the A.O. ought to have accepted the explanation of the assessee and not made addition of Rs. 31,86,000/- under Section 69 of the Act. The Ld.

In the result, the appeal filed by the assessee is allowed.

The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file