SHRI BHARAT ARORA,JALANDHAR vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCL-2E, JALANDHAR

ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana, (in brevity ‘the CIT (A)’) order passed u/s 250 (6) of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2011-12. The impugned order was emanated from the order of the ld. DCIT Central Circle- II, Jalandhar, (in brevity the ld. AO) order passed u/s 143(3) of the Act.

“1. That the order passed by the Hon’ble CIT(A) dated 17.02.2023 is against the law and facts of the case.

2. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 143(3) r.w.s. 147 of the Act and without complying with the mandatory conditions u/s 147 as envisaged under the Income Tax Act, 1961.

3. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs.23,00,000/-, on account of investment in property, by treating the same as unexplained investment, without considering the facts of the case and without observing the principles of natural justice.

4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

3. Brief fact of the case is that the assessment was framed u/s 143(3) of the Act with addition amount of Rs.23 lacs. A search and seizure operation was conducted u/s 132 on the film industry group. Further a survey was conducted u/s 133A of the Act at the premises of M/s Film Institute. During survey the documents was impounded where the Bharat Arora, i.e. assessee had purchased the property in Jalandhar for consideration of 47 lacs plus Rs.3,76,000/- for registration charges. The documents were impounded was an agreement and the consideration of property was fixed amount to Rs.1,05,00,000/-. In this agreement the proposed purchaser has been mentioned as Smt. Rupinder Arora W/o assessee and the seller was Smt. Ripanjit Kaur. During assessment proceeding Smt. Ripanjit Kaur stated that the amount was finally settled amount to Rs.96 lacs. The ld. AO rejected the claim of the assessee about the valuation of the property and accepted the valuation amount to Rs.1,05,00,000/-. The ld. AO in assessment allowed the assessee genuine payment to the party which is amount to Rs.35 lacs and 47 lacs which works out totally Rs.82 lacs. The said amount was deducted from the total valuation of property and finally the balance amount Rs.23 lacs was added back with the total income. Aggrieved assessee filed an appeal before the ld. CIT(A) and submitted the additional evidence before the ld. CIT(A) with an affidavit from Smt. Ripanjit Kaur. The cross-examination was duly initiated by the ld. AO as per the direction of the ld. CIT(A) but none was present. The additional evidence is duly discard. The ld. CIT(A) upheld the assessment order. Being aggrieved the assessee filed an appeal before us.

The relevant paragraphs of the CIT(A) order pages 7 to 8 are duly inserted as below:

“During the appellate proceedings, the assessee filed additional evidence in the form of affidavit from Smt. Ripanjit Kaur wherein, she submitted that she received only an amount of Rs. 96 lacs instead of Rs. 1.05 crores for the sale consideration of the said property. Also, she submitted that payment of Rs. 14 lacs was received on 20.05.2010 i.e. after the date of registration of property on 17.05.2010. The additional evidence was forwarded to the AO for consideration who submitted his report vide letter no. 2084 dated 20.12.2021. During the course of forwarding of additional evidence to the AO, authorization was given under Section 250(4) to examine the genuineness of the affidavit of Smt. Ripanjit Kaur by examining the said person on oath.

In pursuance to that, the AO in his report cited above submitted that summons u/s 131 were issued on 04.02.2020 to Smt. Ripanjit Kaur for verification of the affidavit. The summons was received back undelivered with postal remarks as "unclaimed". Further, the AO informed that vide his office letters dated 20.02.2020, 13.05.2021, 01.02.2021 & 07.02.2021, the assessee was asked to produce Smt. Ripanjit Kaur along with supporting evidence for verification. However, no compliance was made. Hence, the AO recommended rejection of the affidavit filed by the assessee in name of Smt. Ripanjit Kaur. Subsequent to that, a detailed show-cause notice was issued to the assessee to explain his case. Reminders were issued as tabulated below for giving opportunity to the assessee:

S. No. DIN & Date of Notice/Show-Cause Notice Hearing Date Remarks 1. ITBA/APL/M/17/2021-22/1038130910(l) dated 27.12.2021 05.01.2022 None appeared ITBA/APL/M/17/2021-22/1038800445(1) dated 17.01.2022 31.01.2022 Seek Adjournment 2.

It is seen that no reply has been filed despite reminders being issued for more than a year. It appears from above that the assessee has nothing more to substantiate regarding the additional evidence submitted during the course of proceedings. As seen from the facts above, the additional evidence submitted by the assessee could not be corroborated by the statement of the person who has signed the affidavit. The value of the said document during the appellate proceedings becomes of no consequence. Hence, the assessee could not substantiate his contentions as filed during the appellate proceedings and the additional evidence produced by the AR is rejected. In view of above, the addition made by the AO to the extent of Rs. 23 lacs is sustained.

Accordingly, this ground of appeal is dismissed.”

6. We heard the rival submission and considered the documents available in the record. In the assessment proceedings the assessee tried to establish that agreement of sale was not a final document. The negotiation was done, and the final amount was settled to Rs.96 lacs. Against the acceptance, the purchaser submitted an affidavit before the ld. CIT(A) as additional evidence. But the revenue authorities were unable to examine the additional evidence duly submitted by the assessee during the appeal proceeding. But the ld. AR further placed in the ground that the reasonable opportunity was denied in the appeal proceeding. We are, therefore, of the opinion that interest of justice would be sub served if the impugned order is set aside and the matters are remitted back to the ld. CIT(A) for consideration thereof afresh. We are not expressing any views on the merits of the case so as to limit the appellate procedure before the Ld. CIT(A). Needless to say, the assessee should get a reasonable opportunity of hearing for setting aside proceedings.

Order pronounced in the open court on 25.08.2023