ABUCHI INFRA VENTURES LIMITED,DELHI vs. INCOME TAX OFFICER, WARD-2(3), , DELHI

The assessee has filed appeal against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 01.08.2023for the Assessment Year 2017-18.

Brief facts of the case are, assessee filed its return of income for AY 2017-18 on 07.11.2017 declaring an income of Rs.1,27,520/-. The case was selected for limited scrutiny under CASS and accordingly, notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) along with questionnaire were issued and served on the assessee through ITBA portal. Several notices u/s 142(1) were issued to the assessee. However there was no compliance from the assessee side and accordingly final show-cause notice was issued to the assessee dated 02.12.2019 through the Manager of the assessee by hand and also through ITBA portal. From the records, AO observed that assessee had entered into property transaction amounting to Rs.1,11,00,000/-. The assessee was asked to submit as to why in absence of any detail or document on record, the total transaction of Rs.1,11,00,000/- be not treated as assessee’s income. Since there was no response from the assessee and also barred by limitation, the AO proceeded to make the addition u/s 69 of the Act and also invoked the provisions of section 115BBE of the Act.

Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi. The ld. CIT (A) reproduced detailed written submissions submitted by the assessee in his order at pages 7 to 10 of the impugned order. During appellate proceedings, the assessee submitted that the AO sent all the notices by email id which was not operational and it came to note subsequently only after demand is populated on the web portal of the Department. Further he observed that assessee filed additional evidences in the shape of ledger account of the property captioned as ‘advance against property’ containing details of date and mode of investment made to the extent of Rs.1.11 crores, copy of bank statement in support of the above payments, copy of registered sale deed dated 02.05.2019. The assessee also filed an application to admit the additional evidences in terms of Rule 46 of the Income Tax Rules, 1962 which is reproduced by ld. CIT (A) at pages 11 and 12 of the impugned order. Further considering the submissions of the assessee, he admitted the additional evidences and remanded the issue to the file of AO asking for the remand report through ITBA portal. After reminders to the AO, the AO did not submit any remand report in response to the additional evidences remanded to the AO. After observing the above non-cooperation of the AO, ld. CIT (A) observed that the only issue under consideration is the investment made by the assessee in property for the value of Rs.1.11 crores as unexplained investment within the meaning of section 69 of the Act. During assessment proceedings, the AO has asked the information relating to the above investment and since no documents were submitted before him, AO treated the same as unexplained investment. Further he observed that the assessee submitted that the said property was funded by liquidating the investment made in other companies i.e. investee companies. Also the assessee highlighted the fact that it made the above payment of Rs.1.11 crores during FY 2016-17 relevant to AY 2017-18 to the vendor/seller, Indian Bank as an advance amount and the transaction was actually concluded during FY 2018-19 by way of executing and registered sale deed on 02.05.2019. Ld. CIT (A) appreciated all the evidences submitted by the assessee along with registered deed in his order. After considering the above facts on record ld. CIT (A) observed that the case was selected for limited scrutiny under CASS for the purpose of verifying the following issues :- (i) Expenses incurred for earning exempt income; (ii) Investment/Advances/Loans; and (iii) Investment in immovable property.

According to ld. CIT (A), AO has observed the transaction of the assessee from the AIR information. Further he observed that AO has sent all the notices u/s 143(2) and 142(1) of the Act were sent to email id. However the assessee maintained that it is not operational email id. However he observed that Form 35 and all other submissions made before him were made from the same email id. He did not accept the fact submitted by the assessee that email account was non-operational. With the above observation, he also observed that though the assessee has stated that the investment in property was funded by liquidating the amounts invested in other investee company. However assessee has not furnished name and address of such investee companies, amount of funds liquidated from each company, their ledger accounts as appearing in its books of account along with confirmation letters from the investee company concern etc. to prove the genuineness of the transaction. With the above observation, he dismissed the appeal filed by the assessee.

The Ld. Assessing officer has erred in making the addition of Rs.1,11,00,000/- into the total income of appellant company based on mere suspicion, conjectures and surmises which is against the true intent of law. Hence, the impugned addition needs to be deleted. The Ld. Assessing Officer has erred in not appreciating the fact that making assessment on adhoc basis u/s 144 of the Act, otherwise than on the basis of all the relevant material gathered after giving an opportunity of hearing to the appellant company.”

At the time of hearing ld. AR of the assessee submitted that the assessee has filed additional evidences before the ld. CIT (A) which ld. CIT (A) has accepted the above additional evidences which contained the complete details of investment i.e. advance made against the property containing the complete details of the transaction, copy of bank statement and also registered sale deed dated 02.05.2019 before the ld. CIT(A). Further he submitted that after accepting the additional evidences, the remand report was called from the AO who had not complied till the passing of the impugned order. Further he submitted that ld. CIT (A) has sustained the addition without appreciating any tangible material on record. In this regard he relied on the decision of Pr.CIT vs. Simpex Granito Pvt. Ltd. (2024) 164 taxman.com 351 (Guj.).

Ld. AR submitted that the lower authorities have made addition invoking the provisions of section 69 of the Act. In this regard, he submitted that the provisions of section 69 can be invoked when a particular investment is not recorded in the books of account. He brought to our notice provisions of section 69 and submitted that twin conditions have to be satisfied i.e. there must be investment which was not recorded in the books of the assessee and explanation offered is not satisfactory. He submitted that since the assessee has established an explanation that the alleged investment was made through proper banking channel and it is duly recorded in the books of account, therefore, invoking of provisions of section 69 is not proper. It is brought to our notice the details of payment made date-wise in the said property. Further he relied on the decision of Hon’ble Supreme Court in the case of ITO vs. Best Cybercity India (P.) Ltd. (2021) 124 taxmann.com 121 (SC). He prayed that the addition made by the AO may be deleted.

On the other hand, ld. DR of the Revenue brought to our notice para 6.23 and 6.24 of the appellate order and relied on the same.

Considered the rival submissions and material placed on record. We observe that the case was selected for limited scrutiny and as per one of the selection criteria, the AO came to know that assessee has made capital transaction to the extent of Rs.1.11 crores through AIR information. Due to non-compliance from the assessee’s side, he proceeded to make the addition u/s 69 of the Act by passing best judgment order u/s 144 of the Act. Aggrieved assessee preferred an appeal before the ld. CIT (A) and before ld. CIT (A), assessee has submitted additional evidences which contained the complete details against payment towards advance against property to the Bank of India, which assessee has taken on auction and the property was originally belonging to Bina Finance Ltd., assessee has made the advance to purchase the abovesaid property during the impugned assessment year to the extent of Rs.1.11 crores and assessee has demonstrated the same by filing a ledger copy for the year under consideration and also declared the abovesaid payment in its financial records. The registration of the same property was concluded on 02.05.2019. Further we observe that all the remittances for the purchase of property was remitted through banking channel and the same was acknowledged by the other party in the sale deed itself at page 7 of the agreement which is placed at pages 44 & 45 of the paper book. Ld. CIT (A) after appreciating the above facts on record proceeded to dismiss the appeal of the assessee by observing that assessee has made a wrong submission before him with regard to email id.

After considering the material facts available on record, we observe that assessee has recorded the above transaction in its books of account and filed the relevant information before first appellate authority. First Appellate Authority appreciated the above facts on record and he proceeded to sustain the addition made by the AO. In fact, the AO has proceeded to make the addition on the suspicion that the investment made by the assessee is unexplained investment u/s 69 of the Act based on the fact that assessee has not submitted any document before him and not complying to various notices. However, all the details were submitted before the ld. CIT (A) and ld. CIT (A) having co-terminus power should have verified the material submitted before him as additional evidences. It is fact on record that he has not appreciated various documents submitted before him as additional evidences and proceeded to sustain the addition u/s 69 of the Act. In our considered view, section 69 can be invoked where, in the impugned assessment year, assessee has made investment which are not recorded in the books of account maintained by the assessee and the assessee offers no explanation about the nature and source of investment. Further the explanation offered by the assessee is not, in the opinion of the AO, satisfactory. Therefore, in the given case, the assessee has brought to our notice that assessee has recorded the above investment in its books of accounts maintained by it and the assessee has offered the relevant information about the nature and source of the investment before the ld. CIT (A). Ld. CIT(A) has not explained the satisfactory reasons for rejecting the detailed submissions in the form of additional evidences. It is also fact on record that the AO has not filed any remand report on the same issue which was remanded to him. After considering the detailed submissions of the assessee, we observe that assessee has brought on record all relevant material and also proved the fact that the abovesaid investment is already recorded in the books of account and all the payments were through proper banking channel. Originally, the AO has made the addition invoking the provisions of section 69 on the presumption that assessee has not explained the above investment. Therefore, considering the factual matrix on record, we observe that assessee has already proved that assessee has maintained books of account and also advance paid to the purchase of property through the bank and the registration was completed in the subsequent assessment year. Therefore the source and nature of investment was already explained by the assessee before the ld. CIT (A). Accordingly, the grounds raised