2017 (5) TMI 1581 - HC - Income Tax

Additions u/s 69 - initial burden to explain the nature and source of the investment in land not recorded in the books of assessee - Held that - On factual matrix, the tribunal has decided that burden is not shifted from assessee to department and though finding on third issue, no perversity is found, we find no ground to interfere.The amounts were received from bulk purchasers before the amount was paid as per agreement. A sum of ₹ 21,000/- was paid on 9.2.2003 and ₹ 5,00,000/- was paid on 4.3.2003 and a sum of ₹ 5,11,000/- was mentioned in the agreement. In the case of Govind Vatika Project , a sum of ₹ 21,000/- was paid before the date of agreement and a sum of ₹ 10,00,000/- was paid on 15.10.2004. The assessee has also filed the cash flow statement also. Looking to the modus operandi of the business which is verifiable from the execution of the project of Govind Vatika Project , we hold that the investment for purchasing the land is out of the founds received from bulk and retail purchasers and hence no addition is required to be made on this account. - Decided in favour of the assessee and against the department.

Summary

Issues Involved:

1. Justification of the Tribunal's decision to delete additions under Section 69 of the Income Tax Act based on new evidence not placed before the original and first appellate authority.
2. Appropriateness of the Tribunal shifting the burden of proof to the department despite incriminating documents and statements under Section 131.
3. Whether the Tribunal's order is perverse and violative of principles of natural justice due to reliance on new evidence.

Detailed Analysis:

Issue 1: Justification of the Tribunal's Decision to Delete Additions Based on New Evidence

The Tribunal allowed the appeal of the assessee and dismissed the appeal of the department after considering additional evidence produced by the assessee under Rule 29 of the Appellate Tribunal Rules, 1963. Rule 29 stipulates that additional evidence can be admitted if the Tribunal requires it to pass orders or if the income-tax authorities did not give sufficient opportunity to the assessee to adduce evidence. The Tribunal followed this procedure, despite objections from the department. The court found no error in the Tribunal's decision to entertain additional evidence under Rule 29, thus answering this issue in favor of the assessee.

Issue 2: Appropriateness of Shifting the Burden of Proof

The Tribunal initially noted that the burden to explain the nature and source of the investment in land lay on the assessee, who failed to discharge this burden. However, the Tribunal also considered the assessee's claim that advances received from prospective plot owners were reflected in seized diaries. The Tribunal found discrepancies in the names and amounts recorded in the diaries and the list of plot owners provided by the assessee, indicating that the assessee failed to link the entries in the diaries to the cash flow summary. Despite this, the Tribunal concluded that the investment for purchasing land was out of funds received from bulk and retail purchasers, thus deleting the addition of ?1,24,00,000 confirmed by the CIT(A). The court upheld the Tribunal's decision, finding no error in shifting the burden of proof.

Issue 3: Tribunal's Order and Principles of Natural Justice

The Tribunal's order was challenged as being perverse and violative of natural justice since it was based on new evidence not presented before the lower authorities. The Tribunal observed that the assessee did not maintain regular books of accounts but only diaries, which were relevant to ascertain transactions. The Tribunal noted that the Revenue did not take action against those who received unaccounted money, and concluded that the seized documents showed the source of funds, thus deleting the additions. The court found no perversity in the Tribunal's findings and upheld the decision, answering this issue in favor of the assessee.

Conclusion:

The appeals were dismissed, with the court finding no grounds to interfere with the Tribunal's decision. The issues were answered in favor of the assessee and against the department, affirming the Tribunal's approach and conclusions based on the additional evidence and the factual matrix of the case.