2022 (1) TMI 425 - AT - Income Tax

Gain on sale immovable property - property jointly hold - correct head of income - capital gain or business income - HELD THAT - There is no evidence to show that the purchase and sale of the property was with an intention of Investment.CIT(A) has treated the transaction to be an adventure in the nature of trade. The facts and circumstances as obtaining in this case do show the intention of assessee to resell the land and not to hold the same. It was just within a period of four months from the date of purchase that the assessee sold the land. Considering the intention of the assessee as emanating from the above circumstances we uphold the action of the ld. CIT(A) in treating the sale transaction as an adventure in the nature of trade. The impugned order is therefore confirmed on this score. Unexplained cash deposits into bank account - HELD THAT - Having regard to the facts of the case and considering the quantum of amount involved with reference to other attending circumstances we are satisfied that the deposit of 3 lakhs cannot be considered as emanating from any undisclosed sources for which the ld. CIT(A) has accepted the explanation only to the extent of 75, 000. There is no reason as to how this magical figure of 75, 000 came into being. As such we order to delete the remaining addition . Penalty imposed u/s 271(1)(c) - HELD THAT - While disposing of the quantum appeal we have deleted the addition sustained in the appeal on account of cash deposit in the bank account. In so far as the sustenance of addition by the ld. CIT(A) amounting to 21, 25, 000 is concerned we find that the assessee has not been provided an adequate opportunity of hearing to show cause as to why the penalty should not be imposed. A case was made out before the ld. CIT(A) that some dispute was going on between the assessee and his counsel representing the matter before the AO as a result of which proper representation could not be made before the AO. Considering the entirety of the facts of the case we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the AO. We order accordingly and direct him to provide an opportunity to the assessee for putting forth his point of view before imposing the penalty.

Summary

Issues:
1. Confirmation of addition of ?21,25,000 in quantum appeal.
2. Confirmation of addition of ?2,25,000 for unexplained cash deposits in bank account.
3. Imposition of penalty on quantum additions upheld by CIT(A).
4. Deletion of addition of ?21,25,000 in penalty appeal.
5. Confirmation of addition of ?21,25,000 as business income.
6. Confirmation of addition of ?46,02,400 for unexplained cash deposits in bank account.
7. Imposition of penalty under section 271(1)(c) on upheld additions.

Issue 1:
In the quantum appeal, the assessee contested the addition of ?21,25,000, which was confirmed by the AO. The CIT(A) treated the transaction as an adventure in the nature of trade, considering the intention of the assessee to resell the land. The ITAT upheld the CIT(A)'s decision, stating that the sale transaction was indeed an adventure in the nature of trade, as evidenced by the quick resale of the land within four months.

Issue 2:
Regarding the addition of ?2,25,000 for unexplained cash deposits in the bank account, the AO made the addition as the assessee failed to provide a satisfactory explanation. The CIT(A) partially accepted the explanation, reducing the addition to ?75,000. The ITAT reviewed the case and found that the remaining addition of ?2,25,000 lacked proper justification. Consequently, the ITAT ordered the deletion of this amount.

Issue 3:
The AO imposed a penalty on the quantum additions upheld by the CIT(A). The ITAT noted that the penalty proceedings were conducted ex-parte, and the assessee was not given a fair opportunity to present their case. Considering this, the ITAT set aside the penalty order and directed the AO to provide the assessee with a proper opportunity to be heard before imposing any penalty.

Issue 4:
In the penalty appeal, the assessee challenged the addition of ?21,25,000, which was confirmed by the CIT(A). The ITAT observed that the assessee was not adequately heard before the penalty was imposed. Therefore, the ITAT set aside the penalty order and instructed the AO to allow the assessee to present their case before deciding on the penalty.

Issue 5:
The confirmation of the addition of ?21,25,000 as business income was challenged in the penalty appeal. The ITAT upheld the CIT(A)'s decision, treating the amount as profit from an adventure in the nature of trade, similar to the decision in the quantum appeal.

Issue 6:
Regarding the addition of ?46,02,400 for unexplained cash deposits in the bank account in the penalty appeal, the ITAT found that the AO did not consider the withdrawals or re-deposits in the bank account. The ITAT directed the AO to reevaluate the issue, considering the assessee's business activities and providing a fair opportunity for explanation before making any decision.

Issue 7:
The imposition of penalty under section 271(1)(c) on the upheld additions was challenged in the penalty appeal. The ITAT noted that the penalty proceedings were conducted ex-parte, and the assessee was not given a fair chance to participate. Consequently, the ITAT set aside the penalty order and instructed the AO to reassess the penalty after affording the assessee a reasonable opportunity to be heard.

This detailed analysis covers all the issues involved in the legal judgment, providing a comprehensive overview of the proceedings and decisions made by the authorities and the ITAT.