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Facts
The assessee filed his return declaring an income of Rs. 6,09,500/-. The case was selected for limited scrutiny to verify cash deposits and withdrawals. During assessment, the assessee declared income from business and other sources, and claimed deduction under Chapter VI A. Subsequently, it was found that the assessee sold immovable property for Rs. 2.7 Crores and reinvested the proceeds, claiming exemption under Section 54. The AO disallowed Rs. 50 lakhs paid in cash for perfecting the title of the old property.
Held
The Tribunal noted that the AO exceeded the scope of limited scrutiny by probing issues not selected for it, violating CBDT instructions. However, it also observed that the AO did not provide a conclusive finding on the Rs. 50 lakhs payment issue and the assessee failed to provide complete details. Therefore, the issue was remitted back to the AO for a conclusive finding.
Key Issues
Whether the Assessing Officer exceeded the scope of limited scrutiny by investigating issues not originally selected, and whether the disallowance of Rs. 50 lakhs based on an affidavit was justified without proper inquiry?
Sections Cited
143(2), 142(1), 54, 54F, 143(3)
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against CIT(A)’s order vide DIN &Order No: ITBA/NFAC/S/250/2024-25/1074818991(1) dated 21.03.2025, on the following grounds of appeal :
1. The Appellant craves leave for raising a legal ground" which was not before the CIT (A).
2. Without prejudice to the above, the following grounds are raised :
3. The CIT (A) erred in passing a non-speaking Order.
4. The CIT (A) failed to appreciate that a Notarised Sworn Affidavit was filed before the AO confirming the receipt of Rs. 50 lakhs by the consenting witness.
5. Ld. CIT (A) failed to appreciate that the Show Cause Notice issued on 25/11/2019 by the AO did not speak even a single word about acceptance or otherwise of the Confirmation Deed and Notarised Affidavit.
6. The Appellant craves leave to Add, Alter or Deleteany Ground of Appeal at the time of hearing.
The assessee has also filed for stay of demand of Rs.32,72,831/- vide his stay application dated 08.06.2025.
Briefly stated, the facts of the case are that the assessee filed return of income on 04.08.2017 declaring total income of Rs.6,09,500/-. The case was selected for limited scrutiny on the basis of CASS to verify (i) large cash deposit during the year (ii) cash withdrawals. Accordingly, a notice under section 143(2) of the Act was issued on 09.08.2017 which was served to the assessee. Other statutory notices were issued to the assessee. Assessee submitted reply and it was observed that assessee declared income from business of Rs.5,97,875/- and income from other sources of Rs.1,71,629/-, and declared a taxable income of Rs.6,09,500/- after claiming deduction under Chapter VI A of Rs.1,60,000/-. During the course of assessment proceedings, notice under section 142(1) of the Act was issued on different dates and assessee submitted reply on 19.11.2019 stating that assessee has sold immovable property (vacant land) for a total consideration of Rs.2.7 Crores and has reinvested the proceeds of the sale in another residential house property and claimed exemption under section 54 of the Act. During the Financial Year 2016-17, further opportunity was given to the assessee to furnish details of the asset sold along with copy of sale deed, details of cost of acquisition claimed along with supporting documentary evidences vide show cause notice No.ITBA/AST/7/143(3)(SCN)-2019-20/1012917(1) dated 29.11.2019. In response to the show cause notice dated 29.11.2019, assessee furnished statement of income, financial state of affairs, copy of sale deed, copy of sale deed of asset purchased and improvements made in the land purchased, copy of bank account statement and copy of absolute sale deed. The assessee has deposited the sale proceeds in the savings bank account and utilized a part of the amount calculated in the stipulated period and claimed exemption under section 54F of the Act.
Further, it was noticed that the assessee has sold original assets on 16.12.2010 bearing survey No.66/3 at Kammanahalli Village, Begur Hobli, Bangalore South Taluk and site No.1173, V.P. Katha No.774/B situated at Begur Village, Begur Hobli, Bangalore South Taluk, for a total consideration of Rs.35,36,140/-. The assessee in the computation of Income has claimed an amount of Rs. 35,36,140/- as cost of the old asset and also has submitted an un-registered confirmation deed dated 16.12.2010 for having paid an amount of Rs. 50,00,000/- in cash to the seller P. Chowrappa's Son Sri. C. Gnanaprakash Raj who has signed in the sale deed dated 16.12.2010 as consenting witness No1. Subsequently the assessee has submitted a notarised affidavit dated 19.12.2019 for the confirmation deed dated 16.12.2010 for having paid by cash an amount of Rs. 50,00,000/- to the seller P. Chowrappa's Son Sri. C. Gnanaprakash Raj. The Affidavit was only notorised by Smt. Deepa M, Advocate & Notary Public on 19.12.2019 and not registered. This is the only evidence provided to explain the amount of cash of Rs.50 lakhs paid to the seller's son Sri. C. Gnanaprakash Raj by the assessee. The piece of the evidence submitted by the assessee for payment of Rs. 50,00,000/- in cash for the purchase of the original asset by the assessee was not accepted by AO as no proper supporting evidences to substantiate the claim was submitted and concluded assessment after allowing the proportionate exemption of LTCG under section54F of the Act of Rs.1,01,41,043/-. The Long Term Capital gain was assessed at Rs. 1,03,13,800 Accordingly, income was assessed at Rs.1,09,23,300/-.
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A) challenging the addition made towards capital gain. The learned CIT(A) confirmed the Order of the AO.
Aggrieved from the above Order, assessee filed appeal before the Tribunal. The learned Counsel has filed written synopsis which is as under:
He reiterated the submissions made in the above written synopsis.
On the other hand, learned DR relied on the Order of the AO and objected for accepting additional ground and submitted that the AO has noticed that the assessee has deposited huge cash in the bank account and he has withdrawn Rs.50 lakhs of cash and paid to C. Gnanaprakashraj which has not been accepted by the AO. Therefore the legal grounds raised by the assessee is not acceptable. The instructions issued by the CBDT and case law relied on as above in the written synopsis filed will not help the assessee since AO has examined the issue, being the very purpose of selection for scrutiny and even it has been observed that the assessee has not shown any capital gain in his return of income inspite of having capital gain on the sale of capital asset (vacant land). The Computaion of capital gain is correct. THE payment of RS. 50,00,000/- is direct correlated with the cash withdrawal as per reaon for selection of scrutiny.
Considering the rival submissions, we noted that the case has been selected under CASS for the examination of the above noted 2 points under limited scrutiny and copy of notice under section 143(2) of the Act is placed at Paper Book Page Nos.16 and 17. We are in agreement on the arguments of the ls. DR. On going through the above reason for selection of scrutiny, we observed that the assessee has taken additional ground in the written synopsis noted above but the AO has not given complete finding on that particular point. Therefore, this issue is remitted back to the AO for a conclusive finding. We noted from the Order of the AO that assessee has paid Rs.50 lakhs in cash which has been disallowed. During the course of hearing before us, assessee has not produced complete copy of the notice issued by the AO under section 142(1) of the Act to examine the relevant issue for selection for scrutiny under CASS. Therefore, the additional ground raised by the assessee is not maintainable and we remit this issue back to the file of the AO for giving conclusive finding for payment of Rs.50 lakhs as it is not discerning from the Order of the AO the source of Rs.50 lakhs paid by the assessee as noted in the Assessment Order at para No.4. Assessee has also not filed complete details of submissions made during the course of assessment proceedings. Therefore, this issue is remitted back to the file of AO for a conclusive finding of payment of Rs.50 lakhs. The AO is directed to give reasonable opportunity of being heard to the assessee and decide issue as per law. The assessee is directed to substantiate his claim with cogent documents and not to seek unnecessary adjournments for early disposal of the case.
Assessee has also filed stay of demand in stay application No.48/Bang/2025. Since we have remitted the quantum proceedings to the file of AO, therefore there is no need to adjudicate the stay petition filed by the assessee. Therefore, this stay is dismissed.
In the result, appeal filed by the assessee is allowed for statistical purposes and stay petition is dismissed.