2020 (2) TMI 510 - AT - Income Tax

Undisclosed investment in construction of Hotel premises u/s 69B - HELD THAT - We agree with the fact that suitable opportunity have been provided by the Assessing Officer as well as by the ld. CIT(A), at the same time, given fact that the Karta of the assessee HUF who was handling the matters has since expired on 17.04.2014 and being a family run business, the challenges in transition of the business affairs to the next generation and in attending to the various proceedings cannot be ruled out. As highlighted by the ld AR, we find that there are various entries in the loose excel sheets in the form of cash deposits, partner drawings, repayment of loan and entries relating to double counting which prima facie are not in the nature of expenditure on construction of the hotel and thus cannot be considered as unexplained investment u/s 69B - There are submissions filed by the assessee before DDIT (Inv-II), Jaipur explaining the source of such investment in the hotel which has also not been considered by the Assessing officer. We set aside the matter relating to undisclosed investment in construction of Hotel premises u/s 69B of the Act to the file of the Assessing Officer to examine the same afresh as per law without getting influenced by our prima facie observations as noted above.- Appeal of assessee are partly allowed for statistical purposes.

Issues Involved:
1. Validity of assessment orders passed under sections 147/144 and 148/143(3) of the Income Tax Act, 1961.
2. Confirmation of additions made on account of unexplained investments under section 69B of the Income Tax Act, 1961.
3. Reliance on materials and statements gathered during survey proceedings under section 133A.
4. Initiation of penalties under sections 271(1)(c) and 271A of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Assessment Orders:
The assessee challenged the validity of the assessment orders passed under sections 147/144 and 148/143(3) of the Income Tax Act, 1961, arguing that the orders were unjust, bad in law, and not in accordance with the provisions of the law. The assessee contended that the survey conducted at the premises was in violation of section 133A and that the objections raised were ignored by the Assessing Officer (AO). The Tribunal noted that the assessee did not press these grounds during the hearing, leading to their dismissal.

2. Confirmation of Additions under Section 69B:
The primary issue was the confirmation of additions made by the AO on account of unexplained investments in the construction of a hotel. The AO had relied on loose excel sheets found during a survey, which allegedly detailed various expenses/payments made during the construction of the hotel. The assessee argued that these excel sheets contained several items unrelated to hotel construction, such as personal drawings, loan repayments, and cash deposits, which should not be considered as unexplained investments.

The Tribunal observed that the AO did not correctly appreciate the nature of the individual items in the excel sheets and failed to consider the source of investments submitted by the assessee. The Tribunal agreed that there were factual inaccuracies in the loose excel sheets and that the source of investment had not been rightly appreciated. Consequently, the matter was set aside to the AO for fresh examination.

3. Reliance on Survey Materials and Statements:
The assessee contended that the AO had placed undue reliance on materials and statements gathered during the survey proceedings, which were argued to have no evidentiary value. The Tribunal noted that the statements recorded during the survey and the materials gathered were challenged as unreliable and non-pertinent to the assessee. The Tribunal directed the AO to re-examine the matter, considering the factual inaccuracies and the source of investments submitted by the assessee.

4. Initiation of Penalties under Sections 271(1)(c) and 271A:
The assessee challenged the initiation of penalties under sections 271(1)(c) and 271A, arguing that the penalties were arbitrary. The Tribunal noted that these grounds were not pressed by the assessee during the hearing, leading to their dismissal.

Conclusion:
The Tribunal set aside the matter relating to undisclosed investments in the construction of the hotel premises under section 69B to the AO for fresh examination. The AO was directed to consider the submissions and evidence provided by the assessee and to provide a reasonable opportunity for the assessee to present its case. The appeals were partly allowed for statistical purposes.

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