2018 (2) TMI 981 - HC - Income Tax

Addition on account of investment from undisclosed source - assessee was unable to furnish any sustainable documentary evidence with regard to his contention of being a farmer and that the purchase consideration was out of his agricultural income though his returns did not reflect any agricultural income - ITAT deleted the addition - Held that - Land in the name of the assessee and Shri Niwas Thakur was shown in the audited balance sheet of the Company. Shri Niwas Thakur filed an affidavit dated 01.10.2010 to the effect that transfer of land was without consideration and for administrative reasons. MOU was entered between the Company and its Directors that the land bought in the name of the Directors shall be the sole property of the Company. The sale deed dated 16.10.2010, vide which the land under consideration was sold to M/s Oracle Realty Developers, showed that the consideration is to be paid to the Company. Even the AO in its remand report admitted that the sale proceeds were received by the Company. The bank statement of the Company fortified the said fact. The assessment of the Company was framed vide order dated 08.11.2011 under Section 143 (3) of the Act. On analysing the above mentioned evidence and fact, the addition was deleted. The question raised by the Revenue in the appeal is a question of fact and not a question of law, much less a substantial question of law. - Decided against revenue

Summary

Issues:
Appeal against ITAT order confirming CIT (Appeals) order quashing addition of undisclosed income for the assessment year 2009-10.

Analysis:
1. The Assessing Officer (AO) made an addition of undisclosed income of ?1,13,02,800 for the purchase of land from an undisclosed source. The CIT (Appeals) allowed the appeal considering that the land was transferred to facilitate conversion as per State laws and was actually owned by a company. The MOU between the company and its directors clarified the ownership, and stamp duty was paid by the company for the transfer.

2. The Tribunal upheld the CIT (Appeals) decision, stating that the order was based on factual appreciation and not irrational. The appeal did not raise a substantial question of law. The Tribunal found that the sale proceeds were received by the company, and the land was shown in the company's balance sheet, supporting the assessee's explanation.

3. The assessee's explanation was that the land was transferred to comply with State laws requiring at least two directors with farmer status for land transfer to a company. The transfer was without consideration, as per the Frokt khat, and various documents supported the explanation, including the balance sheet, affidavit, and sale deed showing payment to the company.

4. The Revenue's appeal contended that the issue was a question of fact, not law, and the conclusion was logical based on the evidence. The High Court held that it cannot re-appreciate evidence under Section 260-A of the Act without perversity being established. Therefore, the appeal was dismissed, upholding the Tribunal's decision based on factual findings and legal compliance.