ANWARI BEGUM SHEHNAZ,HYDERABAD vs. ITO, WARD-7(1), HYDERABAD

Succinctly stated, the AO, based on information that the assessee had purchased a property through a registered sale deed for a consideration of Rs. 52,82,000/- but had not filed her return of income for the relevant assessment year, initiated proceedings under Section 147 of the Act. An order under Section 148A(d) was passed on 27.03.2024 and notice under Section 148 was issued on 29.03.2024.

During the course of assessment proceedings, the AO called upon the assessee to explain the source of the investment. In response, the assessee submitted that the purchase consideration was paid during the period from 15.12.2016 to 08.08.2017, relevant to F.Ys. 2016-17 and 2017-18, and was sourced from the retirement benefits of her deceased husband, sale proceeds of another property, amount received against mortgage of property and other retirement benefits.

As is discernible from the assessment order, the assessee specifically submitted before the AO that an amount of Rs. 35 lac had been paid to the seller through banking channels in the FY: 2017-18. Also, it was submitted by the assessee that the balance amount of Rs. 17,82,000/- was also paid through multiple transactions during the preceding financial years.

The AO, however, did not accept the explanation of the assessee. According to him, since the registered sale deed was executed only on 15.06.2019, it was unacceptable that the assessee would have paid the purchase consideration almost two years earlier. The AO further held that the assessee had failed to substantiate the sources of the investment with sufficient documentary evidence.

The AO accepted only Rs. 2,46,695/-, being 50% of the salary income declared by the assessee, as available for making the investment. Accordingly, out of the total investment of Rs. 52,82,000/-, the AO treated Rs. 50,35,305/- [Rs. 52,82,000/- (-) Rs. 2,46,695/-] as unexplained investment under Section 69 of the Act. Accordingly, the AO, vide his order passed under Section 147 r.w Section 144 r.w Section 144B of the Act, dated 30.01.2025, framed the assessment at an income of Rs. 55,28,695.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

The assessee, aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

Shri Mohd. Afzal, Advocate, Ld. Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of the hearing of the appeal, submitted that the authorities below had failed to appreciate the material available on record in the correct perspective. It was submitted that the registered sale deed itself recorded that Rs. 35 lac had already been paid to the seller by cheques during the F.Y. 2017-18. The learned AR drew our attention to the copy of the registered sale deed (copy placed on record). Also, the Ld. AR had drawn our attention to the assessee’s bank statement, wherein the relevant cheque transactions were duly reflected.

Elaborating further on his contention, the Ld. AR submitted that the balance amount of Rs. 17,82,000/- was also paid to the seller through three transactions, viz, (i). Rs. 7 lac through cheque dated 07.02.2017; (ii). Rs. 3,82,000/- by cash on 06.02.2017; and (iii). Rs. 7 lac through cheque No. 214756 dated 15.12.2016. The Ld. AR submitted that the entire investment had been made in the preceding financial years and could not be treated as unexplained investment in A.Y. 2020- 21.

Per contra, Shri K Prasad, the learned Senior Departmental Representative (for short, “Sr. DR”) relied upon the orders of the authorities below and submitted that the assessee had failed to establish through cogent and irrefutable evidence that the purchase consideration for the subject property had actually been paid in the preceding years. It was therefore submitted that the addition made under Section 69 of the Act was justified.

We have heard the Ld. Authorized Representatives of both parties in the backdrop of the orders of the authorities below as well as the material available on record.

We find that the registered sale deed dated 15.06.2019 itself clearly records that, out of the total purchase consideration of Rs. 52,82,000/-, an amount of Rs. 35 lac had been paid through cheques during the period relevant to F.Y. 2017-18. The said payments are also reflected in the assessee's bank account.

In view of the aforesaid documentary evidence, we find no justification in treating the amount of Rs. 35 lac as unexplained investment in the hands of the assessee for A.Y. 2020-21. The registered sale deed itself establishes that the said amount was paid in the preceding financial year, i.e., the period relevant to AY 2018-19, and not the year under consideration. We thus, in terms of our aforesaid observations, vacate the addition of Rs. 35 lac made by the AO under Section 69 of the Act, which thereafter had been sustained by the CIT(A).

As regards the balance investment of Rs. 17,82,000/-, the assessee has claimed that the same was paid to the seller through multiple transactions. However, on examination of the bank statements and other material available on record, it cannot be conclusively established that the cheque payments were actually made to the seller. Apart from that, there is insufficient evidence on record to substantiate the alleged cash payment of Rs. 3,82,000/-.

We thus, in terms of our aforesaid observations, deem it appropriate to restore the issue relating to the remaining investment of Rs. 17,82,000/- to the file of the AO for fresh adjudication after carrying out necessary verification. The AO shall, in the course of the set aside proceedings, examine the claim of the assessee in the light of the registered sale deed, bank statements and any other supporting evidence furnished by the assessee. Needless to say, the assessee shall be afforded a reasonable opportunity of being heard and shall be at liberty to substantiate her claim by producing confirmation from the seller and such other documentary evidence as may be considered necessary to establish that the aforesaid amount was also paid towards purchase of the subject property during the preceding financial years.

In the result, the addition of Rs. 35 lac made by the AO under Section 69 of the Act is deleted, whereas the addition of Rs. 17,82,000/- is set aside to the file of the AO for fresh verification and adjudication in accordance with law.

In the result, the appeal filed by the assessee is partly allowed in terms of the aforesaid observations.