S. GOPINATH,CHENNAI vs. THE ITO, NON CORPORATE WARD-22(1), CHENNAI

Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the order of learned Commissioner of Income Tax (Appeals)-10, Chennai [CIT(A)] dated 05.09.2019 in the matter of an 2 - assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 21.01.2016. In the appeal, the only grievance of the assessee is confirmation of addition of unexplained investment u/s 69 for Rs.155.44 Lacs.

The Registry has noted delay of 842 days in the appeal, the condonation of which has been sought by the assessee on the strength of condonation petition which is accompanied by an affidavit of the assessee. The delay has been attributed partly to lockdown situation arising out of Covid-19 Pandemic and partly due to adverse medical conditions being faced by the assessee. It has been submitted that the appeal ought to have been filed by 13.11.2019 whereas it has been filed on 04.03.2022. The period from 15.03.2020 to 28.02.2022 was to be excluded in terms of order of Hon’ble Supreme Court extending period of limitation due to Covid-19 pandemic. After excluding this period, the period of delay would be 126 days which was due to the fact that the assessee suffered from jaundice and other medical ailments. Though Ld. Sr. DR opposed condonation of delay, however, considering the factual matrix as above, the bench formed an opinion that the delay was to be condoned and the appeal was to be admitted for adjudication on merits. 3.1 The assessee was saddled with impugned addition since the assessee purchased 7.77 Acres of land for consideration of Rs.155.44 Lacs. The assessee is stated to be engaged as petroleum dealerunderproprietorship concern namely M/s Om Agency which was subjected to Tax Audit during the year. In the Balance Sheet, the assessee reflected investment of Rs.34.89 Lacs only and accordingly, the assessee was directed to explainthe discrepancy.

During appellate proceeding, the submissions made by the assessee were subjected to remand proceedings. The assessee claimed to have received Rs.60 Lacs onsale of same property which was used to make the investment. The assessee also sought relief of Rs.33.06 Lacs being amount shown in the Balance Sheet as investment. The Ld. AOreported that investment shown in Balance Sheet was nothing but registration charges and stamp duty paid and over the value of land and these two items do not form part of cost of the property purchased by the assessee. Since these two items were not added, the same could not be held to be source of such payments. The Ld. AR also refused to accept the advance of Rs.60 Lacs as source of investment. The same was on the reasoning that the receipt of Rs.60 Lacs was not reflected in the Balance Sheet. The assessee explained that the accounts of the assessee as individual was not audited but the accounts of his proprietary concern was audited wherein such transactions would not be reflected. The Ld. CIT(A) noted that it may be true that the assessee has taken advance of Rs.60 Lacs from the purchaser vide registered document no. 9106/2012 but in the absence of any entries in the books of accounts, the same could not be accepted as source of investments 4 - made by the assessee, Accordingly, theadditions were confirmed against which the assessee is in further appeal before us.

After careful consideration of material fact, we find that the assessee has purchased the land vide sale deed dated 24.09.2012 for consideration of Rs.155.40 Lacs. On thesame date, the assessee entered into sale agreement No.9106 of 2012 for the sale of same land against identical consideration of Rs.155.40 Lacs and received advance of Rs.60 Lacs. This payment as well as receipt under the two agreements was in cash and therefore, there was direct nexus between the receipt and payment to the extent of Rs.60 Lacs. The property was purchased and sold on the same date and therefore, the investment to the extent of Rs.60 Lacs could not be held to be unexplained investments by the assessee. The amount may not be reflected in the Balance Sheet of M/s Om Agency since the transaction was in individual account. Therefore, the addition to that extent of Rs.60 Lacs is not sustainable. We order so.

So far as the payment of Rs.33.06 Lacs is concerned, the same is stated to be reflected as investment in the Balance Sheet. The payment is stated to be have been made by the assessee during financial years 2008-09 to 2012-13. The same has been detailed in the reply furnished by the assessee on 31.05.2019 to Ld. AO which is placed on page nos. 60 to 62 of the paper-book. Upon perusal of the same, it could be seen that the assessee has made cash payment as well as payments through banking channels on various dates. The payments are as small as Rs.1200/- and as high as Rs.5 Lacs. The petty payments could not beconsidered as payment made by the assessee to seller for the purchase of land. Therefore, the investment to the extent of Rs.15 Lacs could be estimated by us to be the payment made by the assessee to the seller. Therefore, the investment to that extent is to be considered as explained investment. In nutshell, the addition to the extent of Rs.75 Lacs (Rs.60 Lacs + Rs.15 Lacs) stand deleted whereas the balance addition stands sustained. The Ld. AO is directed to recompute the income of the assessee. 7. The appeal stands partly allowed.