2019 (12) TMI 1301 - AT - Income Tax

Unexplained investment from undisclosed sources - CIT-A deleted the addition - as per revenue it is device to cover up the undisclosed income by the assessee by planting a purchaser whose income is exempt under section 10(26AAA) - assessee has claimed to have sold the land through an unregistered agreement which is not possible when the purchaser belongs to Sikkim and will pay such a huge consideration without having a proper title document - HELD THAT - It is beyond preponderance of human probability that a person from Gangtok (Sikkim) would purchase a land in Rajasthan against a consideration of ₹ 2,88,60,000/- without having a proper title deed in his favour. The alleged agreement to sell is not a document which can be verified independently and can be considered as a conclusive evidence for transaction of purchase and sale of the immovable properties. The immovable properties cannot be transferred under such an unregistered document being agreement to sell. The details of assessee s share in the alleged ancestral land are also not available on record. It is also not clear from the record whether the assessee was having the share in the ancestral property to the extent of 19.20 bigha. Not executing the sale deed and registration with the authorities even after the expiry of such a long time creates a genuine doubt about the transaction. The genuineness of the claim has not been established with verifiable documentary evidence. It is also a relevant fact that the alleged purchaser of the land being a Sikkimese, is exempt from Income tax as per section 10(26AAA) - possibility of using the name of such a person as a device to evade the tax cannot be ruled out. Accordingly we set aside this matter to the record of the AO for conducting a proper enquiry particularly on the point of the assessee s share in the alleged ancestral property and whether the said property is available in the exclusive right of the assessee for transfer. The status of the land regarding the possession and the real ownership is also required to be verified. Needless to say that the assessee be given a proper opportunity of hearing before passing the fresh assessment order. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
Addition of unexplained investment from undisclosed sources

Analysis:
The appeal by the revenue was against the order of the ld. CIT (Appeals) for the assessment year 2012-13, challenging the restriction of the addition of ?2,91,52,880 to ?2,92,880 on account of unexplained investment from undisclosed sources. Despite the notice being duly served on the assessee, no one appeared on their behalf. The Tribunal proceeded to hear and dispose of the appeal ex parte.

The assessee, an Individual, did not file a return of income for the relevant year. The Assessing Officer (AO) issued a notice under section 148 of the IT Act based on information about the purchase of immovable properties. The assessee claimed the source of investment was the sale of land to a resident of Gangtok for a total consideration of ?2,88,05,845. However, the AO did not accept this explanation due to lack of verifiable documentary evidence and doubted the feasibility of a large cash transaction. The AO made an addition of ?2,91,52,880 as unexplained investment. The ld. CIT (A) called for a remand report, where the alleged purchaser admitted the transaction, leading to the deletion of the addition.

The ld. D/R contended that the transaction was a cover-up for undisclosed income, as the purchaser's income was exempt under section 10(26AAA) of the IT Act. The D/R argued that the unregistered agreement and absence of a sale deed cast doubt on the genuineness of the transaction. The Tribunal noted that the AO granted multiple opportunities to the assessee, who only provided the agreement after summons were issued. The Tribunal found discrepancies in the transaction details and the lack of evidence supporting the claim. It set aside the matter for a proper enquiry on the assessee's share in the ancestral property and ownership status of the land.

Ultimately, the Tribunal allowed the revenue's appeal for statistical purposes, emphasizing the need for a thorough investigation and proper documentation to substantiate claims of investment from undisclosed sources.