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 & HARYANA HIGH COURT holding the inadmissibility of oral evidence in the presence of registered deed is binding on this Tribunal. Under the circumstances and in the light of the above referred to statutory provisions and case laws, the nature of receipt of the income over and above the registered sale consideration in the hands of seller Mohinder Singh, in our view, will not fall under the head Capital Gains but income from other sources . The amount received by Sh. Mohinder Singh, over and above the sale consideration mentioned in the registered document, is ordered to be assessed as income from other sources. The order of the CIT(A), in the case of Shri Mohinder Singh is hereby set aside. The appeal of the revenue is accordingly treated as allowed. Quantum of additions liable to be made into the income of the purchaser Shri Malkiat Singh - Held that - Though the AO has observed that Shri Malkiat Singh has failed to disclose the source of the entire amount paid over and above the sale consideration mentioned in the sale deeds, however, a fact on the file that cannot be ignored is that Sh. Malkiat Singh, after purchasing the part of the land through first sale deed, sold the same at a higher rate to other persons. The amount received by Sh. Malkiat Singh on such a further sale can be well assumed to be source of the amount paid by him on the occasion of subsequent purchase of land from Shri Mohinder Singh, unless it is established that he had spent the said amount for some other purpose. Hence, the amount received by Sh. Malkiat Singh on resale of land can be assumed to be source of amount paid by him to Shri Mohinder Singh (seller) on a later date. However, this fact has been ignored by the lower authorities. We, therefore, remand the matter to the file of the AO to examine this limited aspect of quantifying the additions required to be made to the income of Sh. Malkiat Singh. It is made clear that no other issue or aspect will be looked into at the end of the AO. Penalty levied on the assessee Mohinder Singh (seller) u/s 271(1)(c) - Held that - As held that the amount received by the assessee Mohinder Singh, over and above the sale consideration mentioned in the sale deed, is liable to be assessed as income from other sources; 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 ?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 ?42,37,500/-, and the remaining amount was claimed to be received in cash. Income tax authorities seized ?2,03,92,500/- as unexplained income.
- Assessment: The AO added ?2,03,92,500/- to Mohinder Singh's income as unexplained cash under Section 69A. Similarly, Malkiat Singh was assessed for unexplained investment of ?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 ?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 ?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 ?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.