Loading judgment…
Facts
The assessee's appeal stems from an order related to AY 2016-17, arising from an assessment order concerning unexplained investments and disallowed exempt income. The assessee had obtained unsecured loans and claimed exempt income from land sale, which the Assessing Officer and CIT(A) did not fully accept.
Held
The Tribunal admitted additional evidence concerning unsecured loans. For the issue of unsecured loans, the Tribunal remitted the matter back to the AO for fresh examination with the additional evidence. For the issue of disallowed exempt income, it was also remitted back to the AO for fresh examination as it was not adequately examined earlier.
Key Issues
Whether the addition on account of unexplained unsecured loans is justified and whether the disallowance of exempt income from land sale is correct.
Sections Cited
250 of the Income-tax Act, 1961, 144(3) of the Act, 133(6) of the Act, 143(2) of the Act, 142(1) of the Act, 2(14)(iii) of the Act
AI-generated summary — verify with the full judgment below
Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 26.12.2023 by the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [in short ‘the CIT(A)’] for the assessment year (AY) 2016- 17, which in turn arises out of assessment order passed by the Assessing Officer (in, short ‘AO’) u/s. 144(3) of the Act on 21.12.2018.
Grounds of appeal
raised by the assessee are as under:
1. On the facts and circumstances of the case as well as the law on the subject, the Ld. CIT(A) has erred in partly confirming the action of the Assessing Officer by sustaining the addition of Rs.2,05,49,500/- out of Rs.2,61,42,500/- on account of unexplained investment.
A.Y 16-17 Harshadbhai M Patel 2. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in disallowing of Rs.1,65,37,512/- against the claim of exempt income.
3. It is, therefore, prayed that the above addition made by the Assessing Officer and confirmed by CIT(A), may please be deleted.
4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
During the course of hearing, the Ld. Authorised Representative for the appellant filed an application dated 24.07.2025, seeking admission of additional evidences in the case assessee for AY 2016-17. This additional evidence pertains to one of the lenders, Ms. Deepika Goyal, from whom unsecured loan of Rs.42,50,000/- was received by the assessee during the year under consideration. As per the Ld. AR of the assessee, since assessee also received loan in the preceding year, by mistake the lender had given the bank statement of preceding year instead of relevant period pertaining to AY 2016-17. 3.1 It is further stated by the Ld. AR that all the loans except in case of Smt. Vimlaben Harshadbhai Patel and Shri Amit Sharma were repaid by the assessee. The assessee had filed the ledger accounts of succeeding years of all the lenders, except in the case of Smt. Vimlaben Harshadbhai Patel and Shri Amit Sharma, as additional evidence. 3.2 The Ld. AR submitted that the additional evidence now sought to be admitted could not be furnished before the Assessing Officer and the CIT(A) due to inadvertent omission. The AR further contended that aforementioned documents go to the root of the matter and are essential for proper adjudication of the issues in dispute.
A.Y 16-17 Harshadbhai M Patel 3.3 The Ld. CIT-DR for the revenue opposed the admission of additional evidence, stating that sufficient opportunity had been granted during assessment and appellate proceedings.
We have heard both the parties and perused the materials available on record. After careful examination, we find that the additional evidence sought to be filed is relevant and crucial for proper adjudication of the issues involved in this appeal. Rule-29 permits ITAT to admit additional evidence for any substantial cause. The intention behind the rule is that substantial justice should be done and interest of substantial justice should be the overriding consideration. Hence, in the interest of justice and fair play, we are of the considered opinion that the additional evidence ought to be admitted. Accordingly, the additional evidence filed by the assessee under Rule 29 of the ITAT Rules is admitted.
Brief facts of the case are that assessee filed his return of income for the year under consideration on 26.01.2017 declaring total income at Rs.7,18,420/-. The return of income of the assessee was selected for scrutiny through CASS and notice u/s.143(2) of the Act was issued. Thereafter, assessee was requested to furnish details regarding the relevant issues, vide notices u/s.142(1) of the Act. In response thereto, assessee submitted the details called for from time to time. On perusal of the details/submissions furnished by the assessee, it was ascertained that the assessee had obtained unsecured loans of Rs.2,61,21,500/- during the year under consideration. Therefore, assessee was requested to A.Y 16-17 Harshadbhai M Patel furnish details regarding the unsecured loans obtained by him during the year. In compliance, assessee merely furnished copies of acknowledgement of ITR and copies of ledger. On perusal of the ITR of the lenders, it was noticed that income declared in those ITRs was very minimal. Along with this, the AO issued notices u/s.133(6) of the Act on random basis seeking confirmation. However, incomplete reply of only two lenders were received. Thus, the genuineness and creditworthiness of the lenders/creditors, in most of the cases were not established. In view of the same, AO treated the unsecured loans amounting to Rs.2,61,21,500/- obtained by the assessee during the year, for investments in immovable properties, as unexplained and added it to his total income. 5.1 AO further noticed that the assessee had claimed exempt income of Rs.1,65,37,512/- in the return of income. The assessee was, therefore, requested to furnish supporting evidences with regard to the said exempt income claimed. In compliance, assessee furnished copy of sale deeds to substantiate his claim of exempt income. On perusal of the sale deeds, the AO noticed that land sold by the assessee was not agricultural land but it was non irrigational land for industrial purposes. It was further noticed that the said land on which exemption was claimed by the assessee, was purchased in the year 2015 and was sold on 15.03.2016. Hence, it was, in fact, short term capital gain derived on sale of capital asset. Further, assessee had not furnished any supporting evidence to prove that agricultural activity was carried out on the said land. Besides, no agricultural income was declared in the return of income by the assessee. Hence, the amount of Rs.1,65,37,512/- claimed as exempt was disallowed and A.Y 16-17 Harshadbhai M Patel treated as short term capital gain of the assessee. Accordingly, assessment order was passed u/s.143(3) of the Act on 21.12.2018 determining total income of the assessee at Rs.4,33,77,430/-.
Aggrieved by the aforesaid assessment order, assessee preferred appeal before CIT(A). Before CIT(A), the assessee had filed written submission along with additional evidence. He forwarded the same to AO for remand report. After receiving remand report, copy of the same was forwarded to assessee for comment. The CIT(A) admitted the additional evidence and thereafter, he has decided the appeal and given his finding at para-7.1 to 7.3.1 at pages 26 to 30 of the appellate order. Regarding the disputed addition of Rs.2,61,21,500/-, CIT(A) observed that assessee submitted loan confirmations and loan details before him, which were not submitted before the AO during assessment proceedings. In the remand report, AO was not satisfied with the submissions/evidences submitted by the assessee. According to the AO, the assessee had not furnished the complete bank statement nor explained the source of money allegedly advanced by these loan lenders. The CIT(A) noted that in the cases of Shri Amit Jindal, Ms. Mita Zenish Ruwala, Shri Naresh Kumar Agarwal, Shri Pradeep Agarwal and Shri Rajkumar Khetan (HUF), the returned incomes were exceeding the quantum of loans advanced. In view of the same, CIT(A) held that the assessee had successfully discharged his onus w.r.t. loan amount of Rs.55,72,000/- from these persons/creditors and failed to substantiate the balance amount of Rs.2,05,49,500/- (Rs.2,61,21,500 – A.Y 16-17 Harshadbhai M Patel Rs.55,72,000). Accordingly, the CIT(A) upheld the addition made by the AO on account of unsecured loans to the extent of Rs.2,05,49,500/-. 6.1 As regarding another disputed issue regarding the disallowance of exempt income of Rs.1,65,37,512/-, CIT(A) observed that the land sold by the assessee was non-agricultural land for industrial purpose and the said land was purchased in the year 2015 and sold on 15.03.2016. Therefore, it was evident that the exempt income claimed by the assessee was nothing but STCG derived on sale of capital asset. Assessee claimed the amount of Rs.1,65,37,512/- even though no supporting evidence was furnished to prove that agricultural activities were carried out on the said land. Besides, the sale deed furnished by the assessee itself reflected that the said land was for industrial use and was non-irrigated land. Accordingly, the CIT(A) observed that there was no way the assessee could have undertaken agricultural activity on the said land. Therefore, he rejected the contentions of the assessee in this regard and confirmed the addition of Rs.1,65,37,512/- made by the AO.
Aggrieved by the order of CIT(A), assessee filed present appeal before the Tribunal. The Ld. AR of the assessee submitted the paper book containing copy of written submission filed before CIT(A), remand report, written submission in reply to remand report filed before CIT(A), ITR acknowledgement along with computation of income, copy of balance sheet, profit & loss account and capital account, copy of bank statements, copy of ledger a/c., contra confirmation of creditors from whom unsecured loans were received. In order to substantiate assessee’s claim of exempt income, Ld. AR A.Y 16-17 Harshadbhai M Patel submitted copy of purchase deed, copy of sale deeds, copy of Form 7/12A and Form 6A (Hak patra), copy of permission to use land in future as non- agricultural land, ledger a/c. of land purchase and deed of land sale, etc. 7.1 As regards the addition of Rs.2,05,49,500/- confirmed by the CIT(A), the Ld. AR submitted that the unsecured loan received by the appellant to the extent of Rs.2,00,00,000/- out of Rs.2,05,50,000/- has already been repaid by the appellant in the subsequent years. Therefore, when all the loans are repaid in subsequent years, addition cannot be made for the receipt of loan particularly when all the creditors assessed to tax and appellant filed contra-confirmation and copies of return of income during the assessment of remand proceedings. The Ld. AR relied on the decisions in cases of (i) Ayachi Chandashekhar Narsangji vs. CIT 42 taxmann.com 251 (Guj) and (ii) PCIT vs. Ambe Trdecorp (P.) Ltd. 145 taxmann.com 27 (Guj). The Hon’ble jurisdictional High Court has held that no addition is liable to be made if the appellant has subsequently repaid the loan which has been accepted by the AO.
We have heard both the parties and perused the materials available on record. We have also deliberated on the decisions relied upon by the Ld. AR. We have already admitted the additional evidence filed by the appellant regarding the unsecured loans. Since the AO did not have the benefit of examining these documents, we deem it appropriate to remand the matter back to the file of the AO with a direction to examine the additional evidence and adjudicate the issue afresh in accordance with law, after affording reasonable opportunity to the assessee. The ground is allowed for statistical purposes.
A.Y 16-17 Harshadbhai M Patel 9. The next ground is regarding the addition of Rs.1,65,37,512/- on account of disallowance of exempt income. Ld. AR stated that during assessment proceedings, assessee furnished the purchase and sale deeds of the land together with Form No. 7/12 and Form No. 6A. It is further stated that when the assessee purchased the land, it was agricultural land and thereafter, assessee got permission to use the land in future as non-agricultural land from District Panchayat office on 16.09.2015. In the said order, it was clearly mentioned that the purchaser of the land has to obtain the permission from the Talathi-cum- Mantri within one month of the use for non-agricultural purposes. The assessee did not use the land for non-agricultural purpose at any time before the sale and no further permission was obtained for use for non-agricultural purpose. Ld. AR relied on the decisions in the cases of (i) Shri Kamanahalli Pilla Reddy Nagesh vs ITO (ITA No. 1396/Bang/2019 (ii) M.R. Anandaram (HUF) vs. ACIT, 142 taxmann.com 403 (Kar) and (iii) Tejabhai Nagjibhai Makwana vs. ITO – 162 taxmann.com 123 (Ahmedabad-ITAT). The Ld. AR, therefore, requested to delete the addition made on account of disallowance of exemption claimed by the assessee.
On the other hand, Ld. CIT-DR for the revenue relied upon the orders of lower authorities. He contended that as per section 2(14)(iii) of the Act, land that is not used for agricultural purposes or is situated within specified urban limits is a capital asset. The Ld. CIT-DR stated that in the present case, the assessee himself converted the land to non-agricultural status prior to sale, affirming its commercial intent. In view of the same, Ld. CIT-DR requested to A.Y 16-17 Harshadbhai M Patel uphold the disallowance of exemption of Rs.1,65,37,512/- and its treatment as short-term capital gain.
We have heard both the parties and perused the materials available on record. We have also deliberated the decisions relied upon by Ld. AR. It is contended by Ld. AR that the appellant did not use the impugned land for non- agricultural purpose at any time before the sale of the land. The appellant did receive permission on 16.09.2015 from the District Panchayat office to use the land in future as non-agricultural land. However, in the said order, it was clearly mentioned that the purchaser of the land has to obtain permission from the Talati-cum-Mantri within one month of the use for non-agricultural purpose. The Ld. AR submitted that the appellant has not obtained any permission from the said authority before sale of the land. We find that this issue has not been examined by the AO. Since we have already remitted back the issue of unsecured loan to the file of AO, this issue is also restored back to his file for fresh examination after granting adequate and reasonable opportunity of being heard to the appellant. This is ground is allowed for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 17/10/2025 in the open court.