SHRI DEEPAK DEVIDAS SAJNANI,UAE vs. THE INCOME TAX OFFICER INT. TAX WARD 4(2)(1), MUMBAI

During the hearing, the solitary issue pressed by the learned Authorised Representative (“learned AR”) pertains to the addition made under section 69 of the Act on account of investment in the immovable property.

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual having residential status as a non-resident during the year under consideration. On the basis of the information available on Departmental Data Base, it was observed that the assessee purchased an immovable property for the agreement value of Rs.2,43,44,840/-. By considering the stamp duty being payable @5% and registration charges of Rs.30,000/-, the Assessing Officer (“AO”) issued notice under section 148A(b) of the Act to the assessee. However, the assessee did not respond to the said notice. Accordingly, the AO, after passing the order (A.Y. 2015-16) 3 under section 148A(d) of the Act, issued notice under section 148 of the Act on 25.04.2023 and initiated proceedings under section 147 of the Act on the basis that investment in the immovable property to the tune of Rs.2,55,91,725/- is unexplained investment and has escaped assessment. In response to a notice issued under section 148 of the Act, the assessee did not file his return of income. In view of the non-compliance and non-submission of the details/explanation called for, the assessee was again provided an opportunity by issuance of a show cause notice, whereby the assessee was asked as to why the assessment should not be completed under section 144 of the Act on a best judgment basis, considering the material available on record. However, the assessee even failed to respond to the show-cause notice. Accordingly, the AO proceeded to complete the assessment on the basis of material available on record. As there was no documentation regarding the nature and source of payment made by the assessee for investment in the immovable property, the AO considered the entire investment of Rs.2,55,91,725/- as unexplained investment under section 69 of the Act and proposed to add the same to the total income of the assessee vide draft assessment order dated 28.03.2024 passed under section 144C(1) of the Act.

The learned DRP (“DRP”), vide its directions dated 24.12.2024 issued under section 144C(5) of the Act, after considering the remand report called from the AO and assessee’s response thereto, directed the AO to restrict the addition to Rs.9 Lakh under section 69 of the Act. In conformity with the direction issued by the learned DRP, the AO passed the impugned final

During the hearing, the learned AR submitted that the assessee has paid a total consideration of Rs.2,10,45,933/- and balance amount of Rs.32,98,567/- is still outstanding and yet to be paid to the builder, who is under liquidation proceedings before the Hon’ble NCLT. The learned AR submitted that the said payment of Rs.2,10,45,933/- was paid by the assessee out of a loan availed from HDFC Bank and payment made through assessee’s own SBI NRE account. It was also submitted that during the year under consideration, only a payment of Rs.5,02,774/- was made by the assessee from the SB INRE account and rest of the payment to the builder, during the year, was from the loan availed from HDFC Bank, which ultimately has not been disputed by the learned DRP.

On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities.

We have considered the submissions of both sides and perused the material available on record. The solitary grievance, which arises for our consideration, pertains to the addition of Rs.9 Lakh made under section 69 of the Act. Since the assessee could not explain the nature and source of investment in immovable property, the AO, vide draft assessment order, proposed an addition of Rs. 2,55,91,725/- under section 69 of the Act. It is evident from the record that in the proceedings before the learned DRP, the assessee made a detailed submission duly supported by the documentary (A.Y. 2015-16) 5 evidence. We further find that these submissions, along with the documentary evidence, were forwarded to the AO, and a remand report was sought. After considering the remand report of the AO and assessee’s reply thereto, the learned DRP accepted the contention of the assessee that an amount of Rs.1,35,49,409/- was paid to the builder out of the loan disbursement made by the HDFC bank. As regards the balance payment of Rs.74,96,524/-, the assessee submitted that the same was paid by the assessee from his SBI NRE account. As is evident from the record, the learned DRP accepted the contention of the assessee only to an extent of Rs.66 Lakh paid by the assessee from the SBI NRE account. Thus, the remaining payment of Rs.8,96,524/- was held to be unexplained by the learned DRP. Accordingly, vide its directions issued under section 144C(5) of the Act, the learned DRP directed the AO to restrict the addition to Rs.9 Lakh (rounded figure) under section 69 of the Act.

During the hearing, in order to support its submission that the entire payment of Rs.74,96,524/- was made by the assessee through its SBI NRE account, the learned AR made reference to the bank statement of the said account, enclosed in the paper book from pages 1-23. From the perusal of the said bank statement of assessee’s SBI NRE account, it is evident that the assessee made various payments in the financial year 2013-14, totalling to Rs.69,93,750/-. However, in the year under consideration, the assessee made two payments of Rs.2,59,329/- and Rs.2,43,445/- via two separate cheques, cleared on 30.04.2014, from his SBI NRE account. Thus, from the perusal of (A.Y. 2015-16) 6 the bank statement, it is evident that during the year under consideration, the assessee made a total payment of Rs.5,02,774/-.

During the hearing, the learned AR submitted that immediately before making the said payment, the assessee transferred an amount of Rs.5 Lakh from his UAE account, and thus submitted that the source of payment made to the builder, during the year, is sufficiently explained. From the perusal of the paper book, we find that there is no document to substantiate that the amount of Rs. 5 Lakh was received by the assessee from the UAE account of the assessee, except for the description in the bank statement of the assessee, which also does not completely substantiate this aspect. As regards the other payments received by the assessee from the UAE account, the assessee has placed on record the remittance receipts from Emirates International Exchange. However, for the payment of Rs. 5 Lakh received on 07.04.2014, no such remittance receipt has been placed on record.

In the present case, it is pertinent to note that even though the total purchase consideration of the property, including stamp duty, was Rs.2,55,91,725/-, the learned DRP restricted the addition to Rs. 9 Lakh by not agreeing with the submission of the assessee. As noted above, the assessee made only a payment of Rs. 5,02,774/- from his SBI NRE account during the year under consideration, and the remaining payment made from the loan disbursed by HDFC Bank is not in dispute. Therefore, we are of the considered view that the addition, if any, under section 69 of the Act in the year under consideration cannot be more than the payment made during the year for the purchase of immovable property, if the assessee could not explain the nature (A.Y. 2015-16) 7 and source of the investment. As the assessee, in the present appeal before us, could not duly substantiate the receipt of a sum of Rs. 5 Lakh from the UAE account with the necessary supporting documents, in the interest of justice and fair play, we deem it appropriate to grant one more opportunity to the assessee to substantiate its claim. Therefore, we restore this issue to the file of the AO, limited to the aspect of examining the nature and source of payment of Rs. 5,02,774/- made by the assessee during the year under consideration from his SBI NRE account for the purchase of the immovable property. With the above directions, the impugned final assessment order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes.