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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi, (in short “the CIT(A)”) dated 22.03.2024 for the Assessment Year (A.Y.) 2011-12.
Asst. Year 2011-12 2 2. The brief facts of the case are that no return of income was filed by the assessee for the AY 2011-12. The AO got an information that the assessee’s firm had purchased an immovable property during the year under consideration for Rs.70,00,000/-, the source of which remained unexplained. Therefore, the AO initiated the proceedings u/s.147 of the Act, after recording the reasons and a notice u/s.148 of the Act was issued on 26.08.2015. There was no compliance in response to the said notice. Neither any return of income was filed in response to notice u/s.148 of the Act nor any compliance was made in response to notice and questionnaire issued u/s.142(1) of the Act. Therefore, the AO completed the assessment order ex-parte u/s.144 r.w.s 147 of the Act dated 30.11.2016 and the unexplained investment in land of Rs.70,00,000/- was considered as income of the assessee.
Aggrieved with the order of the AO, the assessee has filed an appeal before the First Appellate Authority, which was decided by the CIT(A) vide impugned order and the appeal of the assessee was dismissed. The assessee had filed certain additional evidences before the Ld. CIT(A) on which remand report was called from the AO. After considering the submission of the assessee and the report of the AO, the Ld. CIT(A) confirmed the addition as made by the AO. It was also noticed by the Ld. CIT(A) that the assessee had made investment in another land during the year, the source of which also remained unexplained. Therefore, he enhanced the addition as made by the AO after allowing an opportunity to the assessee and the total addition in 3 respect of unexplained investments in purchase of land was made at Rs.1,55,46,266/- (including the enhanced amount of Rs.85,46,255/-).
Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
Whether on the facts and circumstances and in law, the Ld. Commissioner of Income Tax (Appeals-NFAC) was justified in making the addition of Rs. 1,55,46,266 U/s 69 of the Income Tax Act, 1961 (confirming addition of Rs. 70,00,000 U/s 69 made by the Ld. Income Tax Officer, Ward-1(2)(3) plus enhancement of income of Rs. 85,46,255 U/s 69) without appreciating the fact that, the appellant had explained the nature and source of investment with documentary evidence.
The Ld. Commissioner of Income Tax (Appeals-NFAC) has erred in law and facts as he has failed to cross examine the facts and thus failed to discharge the onus of proving the subject addition made is in the nature of income 3. The Ld. Commissioner of Income Tax (Appeals-NFAC) has erred in law and facts by rejecting the supporting documents of appellant on very vague and general ground. 4. Whether on the facts and circumstances and in law, the Ld. Commissioner of Income Tax (Appeals-NFAC) was justified in making total addition of Rs. 1,55,46,266 without appreciating the fact that, during the year under consideration payment to the extent of Rs. 35,46,266 was only made and balance Rs. 1,20,00,000 was outstanding as creditors as at 31/03/2011. The Ld. Commissioner of Income Tax (Appeals-NFAC) has erred in facts as total credit in bank account during FY 2010- 11 was just Rs. 35,11,002, thus the appellant had no other source or income during the FY 2010-11 5. The Income Tax Department has erred in facts and also the Ld. Commissioner of Income Tax Appeals (NFAC) has erred in relying upon remand report which lacked proper examination of documents and was prepared based on vague and general grounds 6. Whether on the facts and circumstances and in law, the Ld. Commissioner of Income Tax (Appeals-NFAC) was justified in enhancing the income of appellant by Rs. 85,46,255 U/s 69 of the Income Tax Act, 1961 based on cherry picking the information which is in favor of Income Tax Department, from submission made by the appellant.
4 7. The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.
8. It is prayed that the order of Commissioner of Income Tax (Appeals-NFAC) is set- aside.
5. Shri Karan Shah, Ld. AR appearing for the assessee submitted that no compliance could be made before the AO for the reason that notices were not received in timely manner. He explained that the show cause notice issued by the AO dated 25.11.2016 was received by the assessee on 01.12.2016 whereas the assessment order was already passed by the AO on 30.11.2016 itself. Thus, the assessee was not given sufficient opportunity by the AO to explain the investment. He explained that the all the relevant documents were furnished before the Ld. CIT(A) on which remand report of the AO was also obtained. As regarding the merits of the addition, the Ld. AR submitted that the assessee had purchased two lands for a consideration of Rs.1.40 crores and the assessee has paid a sum of Rs.20 lakhs only towards the purchase consideration and the balance amount of Rs.1.20 crores was shown as outstanding as sundry creditors. He further submitted that the sum of Rs.20 lakhs was paid out the capital contribution by Shri Jayesh Thakkar, partner of the firm, in support of which the copy of bank statement of Shri Jayesh Thakkar was brought on record. The Ld. AR submitted that the financial statement, copy of bank statement, confirmation of Shri Nand Co-operative Housing Soc. Ltd. and Shri Sharan Co-operative Housing Soc. Ltd. from whom lands were purchased and confirmation of the partner Shri Jayesh Thakkar was all Asst. Year 2011-12 5 furnished before the Ld. CIT(A) which was not considered in right perspective. The Ld. AR contended that the findings given by the Ld. CIT(A) that the PAN and address of two creditors Shri Nand Co- operative Housing Soc. Ltd and Shri Sharan Co-operative Housing Soc. Ltd. was not furnished, was not correct as PAN and address was appearing in their confirmation. The Ld. AR further submitted that the assessee did not have any source of income/credit entry during the year for making payment towards the investments. He further submitted that the outstanding creditors were paid in subsequent year when the funds were available with the firm by way of loan taken from other person. He further submitted that the assessee had paid Rs.11,75,000/- for stamp duty out of loan of Rs.15,00,000/- from Pavitra Corporation dated 16.07.2010 and the copy of confirmation in this regard was already filed before the Ld. CIT(A). The Ld. AR submitted that the addition as confirmed as well as enhanced by the ld. CIT(A) was not correct considering the evidences as brought on record in the course of appellate proceedings.
Per contra, Shri C. Dharni Nath, ld. Sr. DR submitted that the assessee neither filed its return of income nor the accounts of the assessee was brought on record. He had drawn our attention to the sale deed of the purchase of the properties brought on record in the course of this proceeding and submitted that the consideration of Rs.70,00,000/- each for the two properties was already paid by the assessee and no amount was shown as outstanding in the sale deeds.
Asst. Year 2011-12 6 Under the circumstances, the submission of the assessee that only part payment was made towards sale consideration and balance amount was outstanding cannot be held as correct as no such outstanding was shown in the sale deeds. He further pointed out that though cheque nos. for payment of Rs.70,00,000/- was appearing in the sale deed, the date of cheques was not mentioned. The Ld. Sr. DR contended that no seller will register the sale deed and transfer the land to the buyer without receiving the sale consideration. Further, considering the fact that no amount was shown as outstanding in the sale deeds, the submission of the assessee that only part payment was made, cannot be accepted. The Ld. Sr. DR submitted that the entire accounts of the assessee were unreliable and the source of purchase of the property was unexplained. The Ld. Sr. DR further submitted since the AO had made addition in respect of single property, the Ld. CIT(A) had rightly enhanced the addition in respect of both the properties after considering the payment of stamp duty and registration charges in respect of two properties. The Ld. Sr. DR strongly supported the order of the Ld. CIT(A).
We have carefully considered the rival submissions. The AO had made the addition of Rs.70,00,000/- in respect of unexplained investment in one land for the reason that he had information about one land transaction only and no compliance was made by the assessee before him. The assessee had filed additional evidences before the Ld. CIT(A) from which it transpired that the assessee had, in fact, purchased two plot of lands for Rs.70,00,000/- each. In the course of appellate Asst. Year 2011-12 7 proceedings, the Ld. CIT(A) had examined source of investment in both the plots. He not only confirmed the addition as made by the AO but also enhanced the addition in respect of purchase of second plot of land as well as in respect of stamp duty, registration charges and other legal charges. Since the assessee neither filed any return of income nor the accounts of the assessee was ever produced before the Department, the investment made by the assessee was rightly considered as undisclosed income of the assessee.
As regarding the source of investment, the assessee has submitted that the source was duly explained before the Ld. CIT(A). A copy of the sale deed has been brought on record before us. It is found that the assessee had purchased a plot of land from Shri Sharan Co-operative Housing Soc. Ltd. vide sale deed dated 19.07.2010 for a consideration of Rs.70,00,000/-. As per the sale deed the seller has acknowledged receipt of consideration of Rs.70,00,000/- in the following manner. Sr.No. Amount Cheque No. Bank and Branch 1. 20,00,000/- 102827 The Baroda City Co- operative Bank 2. 20,00,000/- 102828 Fatehganj Sakha, 3. 20,00,000/- 102829 Vadodara 4. 10,00,000/- 102830 Total Rs.70,00,000/- received in full
The another land was purchased by the assessee from Shri Nand Co-operative Housing Soc. Ltd. vide sale deed dated 19.07.2010 and as per the sale deed the consideration was received by the seller as under:
Asst. Year 2011-12 8 Sr.No. Amount Cheque No. Bank and Branch 1. 20,00,000/- 102831 Baroda City Co- 2. 20,00,000/- 102832 operative Bank Fatehganj Sakha, 3. 20,00,000/- 102833 Vadodara 4. 10,00,000/- 102834 Total Rs.70,00,000/- received in full
Thus, as per the two sale deeds the entire sale consideration of Rs.1.40 crores was acknowledged as received by the two sellers. On the other hand, the assessee has submitted that only a sum of Rs.20,00,000/- was paid to Shri Nand Co-operative Housing Soc. Ltd. and the balance sale consideration of Rs.1.20 crores was outstanding. The assessee had also filed a confirmation of Shri Sharan Co-operative Soc. Ltd. and Shri Nand Co-operative Soc. Ltd. showing outstanding of Rs.70,00,000/- and Rs.50,00,000/- respectively, in support of the land transactions. The Ld. CIT(A) had rejected the confirmations for the reason that the complete address of the parties and their PAN was not appearing in the confirmation. Apart from the deficiency in the confirmation as noted by the Ld. CIT(A), the basic issue to be considered is that no outstanding amount was shown in the two sale deeds. The amount of Rs.20,00,000/- paid to Nand Co-operative Housing Soc. Ltd. was encashed on 07.12.2010 i.e. much after the registration of sale deed on 19.07.2010. It thus transpires that the assessee had purchased the two pieces of land without making any payment to the sellers. It is inconceivable to believe that someone would sale his land without receiving any payment. No evidence has been brought on record by the assessee to establish that the sellers had sold their land without receiving a single penny from the Asst. Year 2011-12 9 assessee. Further, it has also not been explained as to why the entire sale consideration was not shown as outstanding in the sale deeds, if the assessee had not made any payment to the sellers before the execution of the sale deeds.
The assesse has submitted that the payment of sale consideration was made afterwards as and when the funds were available. It is found that the assessee has made payment of Rs.40,00,000/- in AY 2013-14 and Rs.10,00,000/- in AY 2014-15 to Shri Sharan Co-operative Housing Soc. Ltd. and the balance sale consideration of Rs.20,00,000/- was still not paid. Similarly, assessee had made payment of Rs.20,00,000/- in AY 2010-11 and Rs.20,00,000/- in AY 2013-14 and Rs.10,00,000/- in AY 2014-15 to Nand Co-operative Housing Soc. Ltd. and the balance amount of Rs.20,00,000/- was still outstanding. Thus the entire sale consideration has still not been paid after expiry of 14 years from the registration of sale deeds. No seller will sit idle for such an inordinate long period. The only explanation for non-action on the part of the sellers can be that they had already received the payments towards sale consideration at the time of registration of sale deeds.
The sale deeds and confirmation of the two sellers are found to be contradictory to each other. While as per the sale deeds the entire sale consideration was acknowledged as received, as per the confirmation the majority of amount is shown outstanding. Considering the fact that no amount was acknowledged as outstanding in the sale deeds, the Asst. Year 2011-12 10 confirmation filed by the assessee couldn’t have been relied upon and was, therefore, rightly rejected by the Ld. CIT(A). As the source of investment in the two properties remained unexplained, the Ld. CIT(A) had rightly confirmed the addition of Rs.70,00,000/- as made by the AO and also enhanced the addition in respect of purchase of another property for equivalent sum of Rs.70,00,000/-. Accordingly, the addition made by the Revenue in respect of unexplained investment of Rs.1,40,00,000/- in purchase of two land properties is upheld.
As regarding the addition of Rs.11,75,000/- in respect of stamp duty paid on purchase of two lands, this payment was made before the execution of the sale deed. The assessee had explained that this amount was paid out of loan of Rs.15,00,000/- taken from Pavitra Corporation on 16/07/2010. A copy of confirmation of Pavitra Corporation was also filed by the assessee. The ld. CIT(A) has not given any reason for rejecting the evidences as filed by the assessee. Similarly, the document registration charges of Rs.1,41,000/- and legal and security charges of Rs.2,30,256/- for purchase of two lands was made out of cash withdrawals from the bank account and the assessee had brought on record a copy of bank statement in support thereof. It is found that the Ld. CIT(A) had not given any comment on the evidences as brought on record by the assessee. Considering the totality of the facts and evidences as brought on record, we are of the opinion that no addition was called for in respect of stamp duty of Rs.11,75,000/-, document registration charges of Rs.1,41,000/- and legal & security charges of 11 Rs.2,30,256. Accordingly, these additions are deleted. The appeal of the assessee is allowed in part.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Open Court on 21st October, 2024 at Ahmedabad.