2023 (11) TMI 1229 - AT - Income Tax

Unexplained advance - alleged sum was received in preceding years as advance against the sale of immovable property - HELD THAT - We notice that the alleged sum are appearing as opening balance in the financial statement of the assessee which has even been noted by the AO in the assessment order. Since the alleged sum is opening balance and brought forward from the preceding year, Section 68 cannot be invoked for the alleged sum which the AO has applied for making the impugned addition. Details of conveyance deed has also been filed before us to prove that the advance received from all the above stated three parties have been adjusted against the sale consideration for sale of flats. We are thus of the considered view that the alleged sum received from three parties in earlier years is an advance for purchase of flat from assessee and is a genuine transaction and attained finality in the form of conveyance deed and, therefore, no addition is called for unexplained advance. Thus, Ground No. 2 raised by the assessee is allowed. Addition for supported sales - crux of the submissions are that the actual transactions of sale of immovable property is at a lower amount because the sale transactions/agreement to sale has actually taken place in the preceding years but the sale deeds have been registered during the financial year 2013-14 - HELD THAT - Similar is the situation for all the remaining eight transaction and the assessee with complete evidence of the bank transactions, registered conveyance deeds and ledger accounts exhibiting that in the actual sale transactions with all these parties have either been offered as sales in the preceding year for the year under consideration and even in some cases, the balance amount has been received in the subsequent financial years and have been offered to tax accordingly. Since the genuineness of all the transactions have been proved beyond doubt and complete details of transactions with each of the parties has been examined by us, we notice that addition made by the AO taking the value adopted by the stamp valuation authority cannot be held to be justified as the AO had not made the relevant enquiries in accordance with the statute for examining the veracity of the transactions. Further on examining the details filed by the assessee, we find that all the alleged transactions are business transactions and the immovable property in question are part of the stock-in-trade of the assessee sole proprietorship concern and cannot be considered as a capital asset. The provisions under the Act for making the addition for the difference between the fair market value/value adopted by stamp valuation authority over and above the sale consideration received are provided u/s 50C and Section 43CA. Section 50C of the Act deals with the capital asset and since the immovable property in question are stock-in-trade, therefore, Section 50C of the Act will not apply. Addition invoking section 43CA - In the instant case, we notice that the information about all the alleged transactions referred by the AO in the assessment order have been taken from ITS. The agreement to sale have been entered into between the assessee and the concern buyers in the preceding years and major part of the sale consideration has been received in the preceding years itself. The details filed by the assessee also indicates that part of the sale consideration has been received through banking channel in the preceding years itself. Therefore, since the sale transactions have mostly taken place in the past and consideration has been received as per the agreement to sale, no addition can be made for AY 2014-15 by invoking the provision of Section 43CA of the Act. Thus no addition is called for on account of alleged mismatch in the sales turnover as per the return of income vis- -vis ITS details because the actual sale transaction for transfer of immovable property has taken place prior to 31/03/2013 and the assessee has duly offered the amount received against sale of flats in the respective year when such sum was received as part of the gross sales and thus, the addition for suppressed sales is hereby deleted. Accordingly, Ground No. 3 4 raised by the assessee are allowed. Unexplained investment in purchase of immovable property - HELD THAT - We observe that firstly the said transaction is not an undisclosed transaction as it has been carried out through a disclosed bank account. The provisions for making the addition on the basis of difference of stamp duty valuation/fair market value of such property which exceeds the actual consideration paid has been brought into the statute in Section 56(2)(x)(b) by the Finance Act No. 2017, effective from 01/04/2017. Since the instant appeal pertains to Assessment Year 2014-15, there was no mechanism under the Act to make the addition for the excess of fair market value over the purchase consideration paid for purchase of immovable property. Thus, we are inclined to hold that since the assessee has duly disclosed the transactions as consideration has been paid through banking channel, no addition was called for on account of unexplained investment u/s 69. Thus, Ground No. 5 raised by the assessee stands allowed.

Summary

Issues Involved:
1. Validity of ex-parte order by CIT(A).
2. Addition of Rs. 48,00,000/- under Section 68 for unexplained advance received against booking of flats.
3. Addition of Rs. 53,29,150/- for suppressed sales.
4. Addition of Rs. 44,12,850/- for unexplained investment in immovable property.

Summary:

Issue 1: Validity of Ex-parte Order by CIT(A)
The assessee argued that the ex-parte order passed by the CIT(A) was in contravention of Section 250(6) of the Income Tax Act, 1961, and thus void, ultra vires, and null in law. The Tribunal did not specifically address this issue in the judgment.

Issue 2: Addition of Rs. 48,00,000/- under Section 68
The assessee contended that the advance of Rs. 48,00,000/- received from three parties (Amalendu Barik, Debanjan Chakraborty, and Indumati Panchali) was genuine and received in preceding years. The Tribunal observed that the sums were indeed opening balances from previous years and were genuine transactions for the sale of flats, evidenced by conveyance deeds. Therefore, Section 68 could not be invoked, and the addition was deleted.

Issue 3: Addition of Rs. 53,29,150/- for Suppressed Sales
The assessee explained that the sales transactions were recorded in previous years, and the amounts appearing in the Individual Transaction Statement (ITS) were the values adopted by the stamp valuation authority. The Tribunal found that the actual sale transactions occurred in preceding years, and the sale consideration was received and offered to tax in those years. Since the transactions were genuine and supported by evidence, the addition for suppressed sales was deleted.

Issue 4: Addition of Rs. 44,12,850/- for Unexplained Investment
The assessee argued that the investment in the property was made through a disclosed bank account and the actual purchase consideration was Rs. 7,00,000/-, not Rs. 44,12,850/- as per the stamp valuation authority. The Tribunal noted that the provisions for making additions based on stamp duty valuation were effective from 01/04/2017, and thus not applicable for the Assessment Year 2014-15. Consequently, the addition for unexplained investment was deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting all the additions made by the Assessing Officer and CIT(A). The judgment emphasized the genuineness of transactions and the proper application of relevant provisions of the Income Tax Act.