SANKARA RAO PALLE,VISAKHAPATNAM vs. I T O, WARD-3(1), VSP, VISAKHAPATNAM, VISAKHAPATNAM

During the course of the assessment proceedings, it was observed by the AO that as per the information available with the Department, the assessee had participated in an auction conducted on 22/09/2019 (sic) in EP 24/2016 in OS 317/2010 by Addl. Senior Civil Judge, Gajuwaka and had made a payment of Rs.30 lakhs in the Court in a bid for a residential property admeasuring 167 sq yds for a value of Rs.30,90,045/- during the period relevant to AY 2020-21.

On being queried about the source of the aforesaid investment, it was, inter alia, stated by the assessee that he had participated in the auction conducted on 22/09/2016 and not 22/09/2019. Also, the assessee to substantiate his aforesaid claim had furnished with the AO a copy of the sale certificate, dated 22/09/2016, which revealed that he was the highest bidder. Accordingly, it was the claim of the assessee that he had made a successful bid in Court auction for purchasing the subject property, i.e., residential property admeasuring 167 sq yds for a value of Rs.30,90,045/- during the period relevant to AY 2017-18, and not the year under consideration. Apart from that, the assessee submitted that the subject investment at the relevant point of time was sourced out of Gold Loan and thrift loan that was taken by him for purchasing the property.

However, the AO did not find favour with the aforesaid explanation of the assessee and held the investment made by him towards purchase of the subject property, i.e., residential property admeasuring 167 sq yds as his unexplained investment under section 69 of the Act and determined his income at Rs.34,77,735/-.

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

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

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

Shri H. Srinivasulu, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the authorities below had grossly erred in law and facts of the case in making/sustaining the impugned addition of Rs.30,90,045/- under section 69A of the Act. Elaborating on his contention, the Ld. AR submitted that as the assessee had purchased the subject property, i.e., residential house property admeasuring 167 sq yds by participating in an auction conducted on 22/09/2016, i.e., the period relevant to AY 2017-18 and not during the year under consideration, therefore, both the authorities below had grossly erred in law and facts of the case in making/sustaining the impugned addition under section 69 of the Act. The Ld. AR to buttress his contention that the assessee had purchased the property in public auction on 22/09/2116 has drawn our attention to the sale certificate, dated 30/11/2016 a/w copies of the Treasury Challans, Page 155-162 of APB. The Ld. AR submitted that though the assessee had furnished a copy of the sale certificate and specifically submitted before both the lower authorities that the subject investment in the residential property was made in the period relevant to the AY 2017-18 and not during the year under consideration, but neither of them had considered the said material aspect and had most arbitrarily made the impugned addition in the hands of the assessee during the year under consideration.

Per contra, Shri A.P. Babu, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) relied upon the orders of the authorities below.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.

The controversy involved in the present appeal hinges around the sustainability of the impugned addition made by the AO under section 69 of the Act of Rs.30,90,045/-, i.e., the investment made by the assessee towards purchase of residential property admeasuring 167 sq yds vide Court case No.24/2016 for a consideration of Rs.30,90,045/-.

Ostensibly, the AO had initiated the proceedings against the assessee for the reason that he was in receipt of information that the assessee had made an unexplained investment/payment towards purchase of the aforesaid property during the year under consideration. Although, the assessee had in the course of the proceedings before the lower authorities specifically submitted that the subject investment was made by him in the period relevant to AY 2017-18 and had also filed with the AO a copy of the sale certificate, dated 22/09/2016, but both the authorities below had failed to take cognizance of the said material aspect and merely based on the information that was gathered by them from the Insight Portal held the subject investment as having been sourced out of the assessee’s unexplained sources under section 69 of the Act.

We find on a perusal of the sale certificate, dated 30/11/2016 as was filed by the assessee with the AO that the subject investment towards purchase of property admeasuring 167 sq yds with RCC building bearing D.No. LIG 205 containing Ground and First Floor, Plot No.205, Survey No.38, 38 (part) situated at Samatha Nagar, Pedagantyada Mandal, Visakhapatnam-45 was purchased by the assessee by participating in a sale conducted by way of public auction on 22/09/2016 in an execution of Decree in suit OS No.317/2010, i.e., for the period relevant to AY 2017-18. In our view, the AO had based on misconceived fact that the assessee had made the subject investment on 22/09/2019, i.e., the period relevant to AY 2020-21 had initiated the impugned proceedings and made the subject addition in the hands of the assessee.

We thus, in terms of our aforesaid observations are of firm view that as the subject investment had not been made by the assessee during the year under consideration, but in the period relevant to the Ay 2017-18, the impugned addition so made by the AO cannot be sustained and is liable to be vacated.

We thus, in terms of our aforesaid deliberations direct the AO to vacate the addition of Rs.30,909,045/- made by him under section 69 of the Act.

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