2019 (9) TMI 46 - AT - Income Tax

Reopening of assessment u/s 147 - source of money received - verification of the commission received - CIT has taken up the case for revision u/s 263 - HELD THAT - During the reassessment proceedings, the assessee explained that he had received the money of ₹ 8.00 lakhs from Shri Sastry in the year 2008 which was his own money returned by Shri Sastry which was given in the year 1999 for purchase of the land admeasuring 180 sq.yds at Balayyasastry Layout. According to the assessee it was not a commission. Though the assessee stated that he had received the money paid by him to Shri Sastry, no evidence was produced before the AO regarding the payments made to Shri Sastry for purchase of the said land in question. The recitals of the agreement also did not support the contention of the assessee. AO had accepted the explanation of the assessee without production of any evidence to show that the assessee has paid the amount to Shri Sastry earlier. Not even confirmation was obtained from Shri Sastry with regard to payment of ₹ 8 lakhs for purchase of the land. The assessee had entered into agreement cum possession of the property dated 21.04.1999 placed in page No.8 to 10 of the paper book as per which the total consideration was only ₹ 30,000/- and the property was given possession with a condition to register the said land whenever the assessee requested for registration. As per the said sale agreement cum possession, the transaction was complete and the sale consideration was fixed at ₹ 30,000/- which was fully paid by the assessee. Though the assessee stated to have paid ₹ 8,00,000/- subsequent to registration, there was no mention regarding the amounts payable in the sale agreement or the evidence with the assessee regarding the payment. AO simply accepted the explanation of the assessee without any supporting evidence. AO did not examine the settlement deed of the assessee and Shri Sastry which resulted in payment of ₹ 8 lakhs to the assessee. AO also did not examine the sale deed executed by Shri Sastry in favour of third party. Letter dated 24.06.2007 placed in paper book annexed in page No.14 shows that the property was in possession of Shri S.V.Ramana Rao and the assessee intended to register the property in his own name. All these facts establish that the AO did not verify the details and actual sale consideration, hence, there was an error in the assessment order. Similarly, the assessee had received a sum of ₹ 8 lakhs. The same was allowed without supporting evidence. Hence, the assessment order passed by the AO was prejudicial to the interest of the revenue. CIT has rightly taken up the case for revision u/s 263 and the same is upheld. However, the Ld.Pr.CIT directed the AO to bring the sale consideration for long term capital gains and the cost of acquisition to be taken as ₹ 32,400/- after allowing the indexed cost of acquisition. Pr.CIT also directed the AO to examine the taxability of consideration received by the assessee with particular reference to settlement deed between the assessee and Shri Sastry or the sale deed of Shri Sastry after examining Shri Sastry and decide the issue on merits. However, we keep all the issues mentioned in the revision order open before the AO to examine afresh and decide the same on merits. The AO is directed to give reasonable opportunity to the assessee and decide the issue on merits. -Appeal of the assessee is allowed for statistical purpose.

Issues:
1. Delay in filing the appeal.
2. Assessment of long term capital gains tax on the transfer of property.
3. Validity of assessment order passed by the Assessing Officer (AO).
4. Revision of assessment order under section 263 of the Income Tax Act.

Issue 1: Delay in filing the appeal
The assessee filed the appeal with a delay of 39 days citing medical reasons. The condonation petition was submitted, and after hearing both sides, the delay was condoned, and the appeal was admitted.

Issue 2: Assessment of long term capital gains tax on the transfer of property
The case involved the transfer of a property by the assessee to another party for a stated consideration. The Principal Commissioner of Income Tax (Pr.CIT) found that the assessee was liable to pay long term capital gains tax on the profits accrued from the transfer. The Pr.CIT issued a notice under section 263 directing the assessee to explain why the assessment should not be revised. The assessee provided explanations regarding the property transfer, payments made, and the absence of gains from the transaction. However, the Pr.CIT held that the assessment order passed by the AO was erroneous and directed the AO to bring the entire long term capital gains arising from the transfer of the property to tax.

Issue 3: Validity of assessment order passed by the Assessing Officer
The assessee, aggrieved by the order of the Pr.CIT, appealed before the Tribunal. The arguments presented included the examination of details by the AO regarding the receipt of money, which was considered as repayment of an advance. The AO's acceptance of the assessee's contentions was highlighted to quash the notice issued under section 263 and restore the assessment order.

Issue 4: Revision of assessment order under section 263
The Tribunal analyzed the case, noting that the AO had accepted the assessee's explanation without proper evidence of payments made for the property transfer. The lack of verification of details, settlement deeds, and actual sale considerations led to errors in the assessment order. The Tribunal upheld the revision under section 263, directing the AO to reexamine all relevant issues and decide them on merits, providing a reasonable opportunity to the assessee.

In conclusion, the appeal of the assessee was allowed for statistical purposes, with the Tribunal emphasizing the need for thorough examination and verification in tax assessments to ensure accuracy and fairness.

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