2018 (1) TMI 1409 - AT - Income Tax

Unexplained investment - additions relate to the same transaction of sale and purchase of property. Assessee Mohinder Singh (since deceased through his legal heirs) was the seller of the property whereas assessee Malkiat Singh was the purchaser of the property - inadmissibility of oral evidence in the presence of registered deed - Held that - In the case in hand the amount was recovered from the possession of Shri Mohinder Singh assessee by the Police authorities. The assessee has been a partner in the conspiracy to falsely represent about the sale consideration to the registration authorities and thereby resulting into payment of less stamp duty of which the assessee as discussed above has also reaped the consequential benefits. Moreover the question as to the nature of receipt and its taxability has not been gone into by the Hon ble Allahabad High Court. Referring to case of Paramjit Singh 2010 (2) TMI 262 - PUNJAB however we are of the view that this is not a fit case for levy of penalty u/s 271(1)(c). The assessee had disclosed the source of income being the amount received from Sh. Malkiat Singh on account of sale of his land. The assessee was under bona-fide belief that since the entire amount received by him was on account of consideration for the sale of land the land being an agriculture rural land falling outside the purview of the definition of a capital asset the income from the sale of land was exempt from taxation hence non-offering of the said income for taxation cannot be said to be a deliberate act on the part of assessee Mohinder Singh of furnishing of inaccurate particulars of income or concealment of income. - Decided against revenue

Summary

Issues Involved:
1. Quantum additions in the hands of Mohinder Singh and Malkiat Singh.
2. Penalty levied under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Quantum Additions:

Appeals ITA Nos. 665/Chd/2016 & 474/Chd/2017:

- Facts: Mohinder Singh sold agricultural land to Malkiat Singh. During an election, police seized Rs. 2,46,30,000/- from Mohinder Singh, who claimed it was from the sale of land to Malkiat Singh. The sale deeds showed a total value of Rs. 42,37,500/-, and the remaining amount was claimed to be received in cash. Income tax authorities seized Rs. 2,03,92,500/- as unexplained income.
- Assessment: The AO added Rs. 2,03,92,500/- to Mohinder Singh's income as unexplained cash under Section 69A. Similarly, Malkiat Singh was assessed for unexplained investment of Rs. 2,03,92,500/- under Section 69.
- CIT(A) Decision: For Mohinder Singh, CIT(A) observed that the cash was from the sale of land and deleted the addition. For Malkiat Singh, CIT(A) confirmed the addition of Rs. 2,03,92,500/- as unexplained investment.
- Tribunal's Findings:
- Seller (Mohinder Singh): The Tribunal held that the cash seized was indeed from the sale of land but should be taxed as "income from other sources" rather than unexplained income under Section 69A. The Tribunal set aside the CIT(A)'s order and allowed the revenue's appeal.
- Purchaser (Malkiat Singh): The Tribunal remanded the matter to the AO to quantify the additions, considering the resale of land by Malkiat Singh as a potential source of funds for the purchase. The Tribunal partly allowed Malkiat Singh's appeal for statistical purposes.

2. Penalty under Section 271(1)(c):

Appeal ITA No. 666/Chd/2016:

- Facts: The AO levied a penalty on Mohinder Singh for furnishing inaccurate particulars of income and concealing income amounting to Rs. 2,03,92,500/-. The CIT(A) deleted the penalty, observing that the assessee disclosed the source of income and the addition was deleted in quantum proceedings.
- Tribunal's Findings: The Tribunal held that although the amount received by Mohinder Singh was taxable as "income from other sources," the penalty was not justified. The assessee had a bona fide belief that the income from the sale of agricultural land was exempt. Thus, the Tribunal affirmed the CIT(A)'s order deleting the penalty but on different grounds and dismissed the revenue's appeal.

Conclusion:

- Mohinder Singh: The amount of Rs. 2,03,92,500/- is to be assessed as "income from other sources." The penalty under Section 271(1)(c) is deleted.
- Malkiat Singh: The matter is remanded to the AO to quantify the additions considering the resale of land. The appeal is partly allowed for statistical purposes.