2015 (12) TMI 1805 - AT - Income Tax

Unexplained investment in purchase of land - HELD THAT - The assessee has produced copies of Sale Deeds in respect of the transactions carried out through these agreement to sell and the sale deeds have been executed between the sellers and one Mr. Deepak Chauhan, Veena Jindal, Vijay Jain etc. and all the payments are made through cheques. Therefore, the copies of sale deed would disclose that assessee was not a party to any of the transactions otherwise the sale deed of 50% as alleged by Revenue Department should be executed in the name of the assessee as well. The assessee also filed copies of the jamabandi of the property in question which shows that after the sale of properties in question, mutation have been made in the name of purchasers and the name of the assessee did not contain in any the jamabandi. This fact would also strengthen the case of the assessee that assessee was not party to any of the agreement in question and did not make any investment. Case of AO had been that assessee made investments in these properties having half shares of investment i.e. 50% of the entire transaction. 50% transaction was considered as undisclosed investment in the case of M/s Basera Realtors P.Ltd. and their Directors. AO passed the orders in the case of the company and later on, the orders in the case of the company have been set aside by the CIT u/s 263 and AO was directed to consider entire investments/passing of the consideration for purchase of the properties in the hands of M/s Basera Realtors P.Ltd.. M/s Basera Realtors P.Ltd. filed appeal before ITAT Chandigarh against the order under section 263 of the Act and their appeals have been dismissed. AO in pursuance to the order passed under section 263 again had taken the assessment proceedings in the case of M/s Basera Realtors P.Ltd., copy of the assessment order is filed at page 133 of the Paper Book in which again, same facts have been considered and Assessing Officer did not accept contention of the company that 50% of the shares belong to Shri Harinder Singh, assessee because M/s Basera Realtors P.Ltd. has not submitted any evidence of 50% shares of assessee for the purpose of making the addition. AO, therefore, made entire addition of undisclosed investment in the case of M/s Basera Realtors P.Ltd. Thus, Revenue Department has taken a very clear and specific stand on the identical facts that the entire undisclosed investment in property through these agreements in question relate to M/s Basera Realtors P.Ltd. therefore, no addition could be made in the hands of the present assessee otherwise, it would also amount to double addition. Considering all, we are of the view authorities below are not justified in making and confirming the addition on account of undisclosed investment in purchase of the land in question through these agreements. The orders of authorities below are accordingly, set aside and addition is deleted in assessment year 2006-07.

Issues Involved:
1. Re-opening of assessment under sections 147/148 of the Income Tax Act.
2. Addition of Rs. 93,63,000 for unexplained investment in the purchase of land for the assessment year 2006-07.
3. Addition of Rs. 1,28,36,000 for unexplained investment in the purchase of land for the assessment year 2008-09.
4. Addition of Rs. 2,98,39,000 for profit on the sale of alleged residential plots for the assessment year 2008-09.

Detailed Analysis:

1. Re-opening of Assessment under Sections 147/148:
The assessee challenged the re-opening of the assessment under sections 147/148 for both assessment years 2006-07 and 2008-09, arguing that the Assessing Officer (AO) did not apply his mind and lacked tangible material to believe that income had escaped assessment. The tribunal noted that since the entire additions on merits were deleted, the issue of re-opening was left for academic discussion only and did not need a separate decision.

2. Addition of Rs. 93,63,000 for Unexplained Investment in Purchase of Land (A.Y. 2006-07):
The AO made an addition of Rs. 93,63,000 based on agreements dated 05.10.2005 and 30.01.2006, alleging the assessee's half share in the investment. The assessee denied making any investment and claimed his name was misused without consent. The tribunal found that the AO did not conduct proper investigations, failed to verify the signatures through a government agency, and did not examine relevant witnesses. Additionally, the investment was already assessed in the hands of M/s Basera Realtors P. Ltd. under section 263. Therefore, the tribunal deleted the addition of Rs. 93,63,000.

3. Addition of Rs. 1,28,36,000 for Unexplained Investment in Purchase of Land (A.Y. 2008-09):
The issue was similar to the assessment year 2006-07, relying on the same agreements. Following the reasons for the decision in the assessment year 2006-07, the tribunal deleted the addition of Rs. 1,28,36,000 for unexplained investment in the purchase of land.

4. Addition of Rs. 2,98,39,000 for Profit on Sale of Alleged Residential Plots (A.Y. 2008-09):
The AO added Rs. 2,98,39,000 as 50% of the profit from the sale of residential plots, based on information that the assessee and M/s Basera Realtors P. Ltd. earned a net profit of Rs. 596.79 lacs. The tribunal noted that since the addition on the investment in the purchase of land was deleted, there was no basis for the addition of profit on the sale of plots. Furthermore, the entire addition was directed to be made in the hands of M/s Basera Realtors P. Ltd. under section 263. Thus, the tribunal deleted the addition of Rs. 2,98,39,000.

Conclusion:
The tribunal allowed both appeals of the assessee, deleting the additions for unexplained investments and profit on the sale of plots. The issue of re-opening of the assessment was left for academic discussion due to the deletion of all additions on merits.

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