2012 (10) TMI 350 - AT - Income Tax

Protective Assessment Profit on sale of Land - increased from Rs. 1,38,789/- (as per original return) to Rs.12,71,430/. - Assessee contended that Profit from sale of land as questioned by Revenue has already been assessed in the hands of the real owners of the property and he submitted that he had no concern whatsoever with the property in question. - the additions made in the total income of the assessee on account of protective assessment deleted. Unexplained Investment - Assessee contended that he had clarified amount of unexplained investment as Rs.1,70,000/-. However, the assessee has not been able to explain remaining difference. Therefore, Rs.3,27,095/- is considered as unexplained investment. This ground of assessee is partly allowed. Interest disallowed u/s 14A - The said amount is reflected from the bank statements and hence proved. Held that - CIT(A) has erred in coming to the conclusion that the Assessing Officer wanted to disallow the interest for want of proof. - Appeal be allowed in favour of assessee.

Issues:
1. Ex-parte order by CIT(A) without sufficient opportunity of hearing.
2. Addition to total income under various headings.
3. Protective assessment of profit on sale of land.
4. Undisclosed investments and explanations.
5. Disallowance of interest under section 14A.

Ex-parte Order by CIT(A):
The appellant, a broker and real estate dealer with agricultural income, filed an appeal against the CIT(A)-IV, Chennai's order dated 09.09.2011. The appellant contended that the CIT(A) passed an ex-parte order without providing adequate hearing opportunities. The Assessing Officer had added income from the sale of property on a protective basis, although the profit was earned by the appellant's brother and sister, who had filed separate returns. The appellant argued that the CIT(A) wrongly concluded that the entire investment was unexplained, while the appellant had clarified part of it. The appellant also disputed the disallowance of interest under section 14A, providing evidence of interest payments on loans.

Addition to Total Income:
The Assessing Officer made additions to the appellant's total income for the assessment year 2007-08 under three headings: profit on sale of land (protective assessment), unexplained investment, and interest disallowed under section 14A. The CIT(A) confirmed these additions, leading to the appellant's appeal before the Tribunal. The appellant's representative argued that the additions were not justified, presenting evidence that the profit on the sale of land had already been assessed in the hands of the actual owners. The Tribunal found that the profit on sale of land was added to the appellant's income on a protective basis and deleted this addition. Regarding undisclosed investments, the Tribunal partially allowed the appeal, reducing the unexplained investment amount after considering explanations provided by the appellant.

Protective Assessment of Profit on Sale of Land:
The Tribunal noted that profit from the sale of land had been assessed in the hands of the appellant's brother and sister, not the appellant. The additions to the appellant's income were based on protective assessment, which was deemed unnecessary due to the profit already being taxed in the hands of the actual owners. Therefore, the addition related to profit on the sale of land was deleted.

Undisclosed Investments and Explanations:
While the appellant admitted the inability to explain part of the investments, the Tribunal considered the explanations provided and reduced the undisclosed investment amount accordingly. The Tribunal analyzed the purchases made by the appellant, the explanations offered, and the documentary evidence presented to arrive at a revised undisclosed investment figure. The appellant's representative conceded part of the undisclosed investment, leading to a partial allowance of the appeal on this issue.

Disallowance of Interest under Section 14A:
The Tribunal found that the CIT(A) incorrectly concluded that the Assessing Officer intended to disallow interest for lack of proof under section 14A. The Tribunal noted that the Assessing Officer did not question the interest payments' authenticity and allowed the appellant's claim for interest paid on loans. Consequently, the ground of appeal related to the disallowance of interest was allowed in favor of the appellant.

In conclusion, the Tribunal partly allowed the appellant's appeal, addressing issues related to protective assessment, undisclosed investments, and the disallowance of interest under section 14A. The Tribunal considered the evidence presented and made adjustments to the additions made by the Assessing Officer, providing relief to the appellant on certain grounds.

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