2023 (1) TMI 25 - AT - Income Tax

Unexplained investment in purchase of property being Godown - addition of entire payment upto the date of sale deed - HELD THAT - The assessee has produced the return of income of the preceding years as well as other record including the profit and loss account. Though the return of income were filed under section 44AD however, the availability of the cash was explained by the assessee in a chart showing the savings from the profits of the preceding years as well as the loan obtained by the assessee. These details were not considered and discussed either by the AO or by the CIT(A) in the impugned orders. Therefore, in the facts and circumstances of the case, when the AO has made the addition without even considering the fact that the payment of Rs. 1,00,000/- out of Rs. 8,00,000/- as considered by the AO was made in the preceding year and not during the year under consideration and further the explanation of the source of the payment was not discussed by the AO as well as the CIT(A), the impugned order of the CIT(A) is set aside and the matter is remanded to the record of the AO for fresh adjudication after proper verification and examination of the relevant facts as well as record explaining the source of investment made by the assessee. Accordingly, the appeal is allowed for statistical purpose. Reopening of assessment for unexplained investment in purchase of Godown - for AY 2011-12 - There is no allegation in the enquiry report regarding the another transaction of sale of plot for Rs. 3,75,000/- by Late Sh. Charanjit Singh Sehgal to the assessee. Further, the AO in the assessment order has not given any detail of property or title document through which the assessee has allegedly purchased the property. The AO took the second transaction of Late Sh. Charanjit Singh Sehgal as the transaction between the assessee and the vendor without considering the fact that the second transaction reported in the enquiry report does not pertain to the assessee. Accordingly, in the absence of any fact or document to show that the assessee has purchased the said plot of land from Late Sh. Charanjit Singh Sehgal, vide sale deed dated 11.3.2011, the addition made by the AO is baseless and liable to be deleted. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Addition of Rs. 8,00,000/- as unexplained investment in the purchase of a Godown for the assessment year 2008-09.
3. Addition of Rs. 3,75,000/- as unexplained investment in the purchase of land for the assessment year 2011-12.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeals:
The appeals were filed by the assessee on 01.07.2022 against the orders of CIT(A) dated 04.06.2019, resulting in a delay of more than two years. The assessee explained that they did not receive the impugned orders until 20.03.2020 and that the counsel did not communicate the orders. Due to the Covid-19 pandemic, the appeals were delayed further. The learned AR cited the Hon'ble Supreme Court's extension of the limitation period from 15.03.2020 to 20.06.2022. The learned DR opposed the condonation, stating that the orders were sent via speed post. However, the Tribunal found that the details of the speed post were unclear and accepted the explanation provided by the assessee, admitting the appeals for adjudication on merits.

2. Addition of Rs. 8,00,000/- as Unexplained Investment in the Purchase of a Godown (Assessment Year 2008-09):
The AO reopened the assessment based on an enquiry report dated 09.02.2015, which indicated that the assessee purchased a Godown for Rs. 13,00,000/-. The AO made an addition of Rs. 8,00,000/- as unexplained investment. The assessee contended that the source of investment was explained through previous years' income tax returns, bank statements, and other documents. The CIT(A) upheld the addition due to non-appearance of the assessee during the remand proceedings. The Tribunal noted that the payment of Rs. 1,00,000/- was made in the preceding year and not during the year under consideration. The Tribunal found that the AO and CIT(A) did not properly consider the explanation and documents provided by the assessee. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter to the AO for fresh adjudication after proper verification.

3. Addition of Rs. 3,75,000/- as Unexplained Investment in the Purchase of Land (Assessment Year 2011-12):
The AO reopened the assessment based on the same enquiry report, alleging that the assessee purchased land for Rs. 3,75,000/-. The assessee denied any such transaction. The CIT(A) upheld the AO's addition. The Tribunal examined the enquiry report, which mentioned two transactions by Late Sh. Charanjit Singh Sehgal: the sale of a Godown and a residential plot. The report did not indicate that the second transaction involved the assessee. The Tribunal found that the AO initiated reassessment without any basis and made the addition arbitrarily. The Tribunal concluded that there was no evidence or document to show that the assessee purchased the said plot, and therefore, the addition made by the AO was baseless and liable to be deleted.

Conclusion:
The Tribunal admitted the appeals for adjudication on merits due to the delay being covered by the Supreme Court's extension of the limitation period. For the assessment year 2008-09, the Tribunal remanded the matter to the AO for fresh adjudication regarding the addition of Rs. 8,00,000/-. For the assessment year 2011-12, the Tribunal deleted the addition of Rs. 3,75,000/- as it was baseless. The appeals were allowed accordingly.