2019 (9) TMI 718 - AT - Income Tax

Unexplained investment - loose paper was found from the premises of the assessee exhibiting the purchase of a property - HELD THAT - As per the loose paper, the assessee has agreed for payment of 30% at the time of booking; 15% at the time of possession, and balance 55% in eight instalments from February, 2008 to September, 2008. Search was conducted on 11.2.2010, meaning thereby, all these instalments have been adhered to because first time assessee has disclosed cancellation of deal in the statement recorded on 3.5.2010. We could appreciate the case of the assessee had he produced refund of booking amount before the search, that is, if the assessee has demonstrated that payment of ₹ 1.70 lakhs paid through DD was received back by him before 11.2.2010. To some extent it could be appreciated that this paper was pertaining to negotiation of certain deal. It is also important to note that we have to evaluate the position of the payment on the time mentioned in the loose paper. If the assessee has paid money in cash in accordance with the schedule, then it is to be construed that unexplained expenditure was incurred; on cancellation of the deal, even after the search, the assessee has got cash component in cash. He will not disclose it anywhere that circumstances would not absolve him from explaining position of availability of cash from explained sources also at the time of payment reflected in the schedule. It CIT(A) has made a detailed analysis of this schedule in the light of payment through DD and observed that probability of incurrence of expenditure according to the schedule is much more. Only circumstance highlighted by the assessee before us is that deal was cancelled, and therefore, there was no motive or objective to make unexplained investment. The fact that the deal was cancelled has not been brought on record. It is a declaration after the search, which is not relevant factor. Therefore, we do not have any hesitation in concurring with the Revenue authorities on this issue. - Decided against assessee.

Issues Involved:
1. Confirmation of additions of ?10 lakhs and ?14.70 lakhs in the Assessment Years 2008-09 and 2009-10 on account of unexplained investment in property.
2. Validity of the assessee's claim that the property deal was not materialized and the booking amount was refunded.

Issue-Wise Detailed Analysis:

1. Confirmation of Additions:
The primary issue in these appeals is whether the additions of ?10 lakhs and ?14.70 lakhs made by the Assessing Officer (AO) for the Assessment Years 2008-09 and 2009-10, respectively, on account of unexplained investments in property, were justified. The AO based these additions on a loose paper seized during a search under section 132 of the Income Tax Act, 1961, which indicated that the assessee had made investments in a property at Ashirwad Paras. The AO observed that the total value of the property was ?39 lakhs, with 60% to be paid in cash and 40% by cheque. The AO noted that the assessee made a payment of ?1.70 lakhs by demand draft (DD) as a booking amount and the rest in cash. The AO concluded that the investment was spread over two assessment years, leading to the additions.

2. Assessee's Claim of Deal Cancellation:
The assessee contended that the property deal was not ultimately materialized and the booking amount was refunded. The assessee argued that since the deal was cancelled, there was no unexplained investment. The AO, however, was not satisfied with this explanation and made the additions. The Commissioner of Income Tax (Appeals) [CIT(A)] also rejected the assessee's contentions, noting that the seized document clearly indicated payments made by the assessee before the date of the search. The CIT(A) observed that the entries in the seized document left no doubt regarding the payment of cash amounts totaling ?24.70 lakhs from 26/1/2008 to 8/12/2008. The CIT(A) concluded that the assessee's claim that no cash payments were made was factually incorrect and upheld the additions.

Detailed Analysis by the Tribunal:

Contentions and Evidence:
The assessee's counsel argued that the AO should have verified whether the office space was ultimately purchased from the vendor. The counsel emphasized that without corroborative evidence demonstrating the actual purchase of the property, it could not be assumed that the assessee incurred unexplained expenditure. The counsel highlighted that the assessee disclosed the cancellation of the deal in a statement given to the ADIT under section 131 on 3.5.2010.

On the other hand, the CIT-DR contended that the assessee failed to provide any documentary evidence supporting the claim that the deal was not materialized. The CIT-DR argued that the statement given by the assessee was a bald statement made after the search and lacked substantiation through documentary evidence or a certificate from the vendor confirming the cancellation and refund.

Tribunal's Observations:
The Tribunal considered the rival contentions and the record. It noted that the seized paper exhibited the purchase of a property and detailed the payment schedule. The Tribunal observed that the search was conducted on 11.2.2010, and the assessee first disclosed the cancellation of the deal on 3.5.2010. The Tribunal emphasized that the assessee failed to demonstrate that the booking amount was refunded before the search date. The Tribunal agreed with the CIT(A)'s analysis that the probability of incurrence of expenditure according to the schedule was higher. The Tribunal concluded that the assessee's claim of deal cancellation was not substantiated by evidence and upheld the Revenue authorities' findings.

Conclusion:
The Tribunal dismissed the appeals of the assessee, confirming the additions of ?10 lakhs and ?14.70 lakhs for the Assessment Years 2008-09 and 2009-10, respectively, on account of unexplained investments in property. The Tribunal concurred with the Revenue authorities' findings that the assessee failed to substantiate the claim of deal cancellation and refund of the booking amount.

Order:
The appeals of the assessee are dismissed. The order was pronounced in the Court on 10th July, 2019.

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