2020 (3) TMI 503 - HC - Income Tax

Unexplained investment for construction - construction of factory building at Noida - HELD THAT - Today again learned counsel for the Revenue states that record is not available. He is not in a position to deny that in such a case the addition would have to be made for the period in which construction was carried out and could not be totaled at in the last year. Learned counsel for the appellant states that the appellant has certain material which may enable the authorities below to decide this issue. In these circumstances, the appeal is allowed. The impugned order qua addition is set aside and matter is remanded back to the assessing officer to work out the tax liability as per law after considering the material which the appellant may produce.

Summary

Issues:
- Appeal under Section 260A of the Income Tax Act, 1961 challenging an addition of ?2,48,048 as unexplained investment for construction.
- Sustainability of orders Annexures P-1, P-2, and P-6.
- Legality of the addition of ?2,48,048 on account of alleged unexplained investment in the construction of a factory building at Noida.
- Consideration of the rate taken by the D.V.O. for the construction.
- Basis of the addition being mere presumptions and conjectures.

Analysis:
1. The appeal was filed against the order passed by the Income Tax Appellate Tribunal, Amritsar, challenging the addition of ?2,48,048 as unexplained investment for construction. The appellant raised substantial questions of law regarding the sustainability of the orders and the legality of the addition.

2. The court deliberated on whether the unexplained income could be added in a single year of assessment or if it should be allocated back to the relevant years in which the construction took place. The matter was adjourned to further investigate this issue.

3. The learned counsel for the Revenue initially stated that the issue raised could not be verified due to unavailability of records. Subsequently, it was acknowledged that in such cases, the addition should be made for the period in which the construction was carried out, not in the last year alone.

4. The appellant claimed to possess material that could assist the authorities in deciding the issue. Consequently, the court allowed the appeal, setting aside the impugned order regarding the addition of ?2,48,048 and remanding the matter back to the assessing officer for recalculating the tax liability based on any additional material provided by the appellant.

5. As a result of the appeal being allowed, any pending applications were also disposed of. The decision emphasized the importance of considering all relevant material in determining tax liabilities related to unexplained investments in construction projects.