2023 (6) TMI 1020 - AT - Income Tax

Unexplained investment u/s 69 - Agreement to sell which is on a plain paper has been questioned by the AO as well as the ld CIT(A) - HELD THAT - We are intrigued by the fact that the agreement to sell relates to transfer of an immoveable property wherein 90% of the agreed consideration has already exchanged hands at the time of entering into such agreement and at the same time, the handing over the possession has been deferred to the time of registration and which has eventually not happened in the instant case and thus, prima facie reflects a situation which is apparently one-sided at the cost of another party. Having said that, it is relevant to determine the enforceability of such agreement to sell against the assessee in terms of the Indian Contract Act as well as the applicability of the provisions of Transfer of Property Act, Indian Registration Act and Indian Stamp Act. The explanation of the assessee explaining the source of cash payment have to be tested on the touchstone of enforceability of such agreement to sell as per relevant statue and only where it is determined that such an agreement to sell is enforceable in hands of both the parties and/or the parties have actually taken certain steps to enforce their respective rights emanating from such agreement to sell, the same can act as a relevant and credible evidence in support of the explanation of the assessee. As no explanation of the assessee in this regard is given it would be appropriate that the matter is set-aside to the file of the AO to examine the same after providing reasonable opportunity to the assessee - Ground of assessee allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the order of the Learned Commissioner of Income Tax (CIT).
2. Legitimacy of reopening the case under section 148 of the Income Tax Act, 1961.
3. Classification of Rs. 43,15,000/- paid by the Appellant as unexplained investment under Section 69 of the Act.

Summary:

Issue 1: Validity of the Order of the Learned Commissioner of Income Tax (CIT)
The appellant contended that the order of the Learned CIT is bad in law. However, no specific arguments were raised regarding this ground, and it was dismissed as infructuous.

Issue 2: Legitimacy of Reopening the Case under Section 148 of the Income Tax Act, 1961
The appellant did not present any arguments regarding the reopening of the case under section 148. Consequently, this ground was also dismissed as infructuous.

Issue 3: Classification of Rs. 43,15,000/- as Unexplained Investment under Section 69 of the Act
The core issue revolved around the addition of Rs. 43,15,000/- as unexplained investment under Section 69. The appellant argued that the cash payment was sourced from an advance received under an Agreement to Sell a shop, which was not registered or stamped but affirmed by affidavits from witnesses and the buyer. The Assessing Officer (AO) and CIT(A) questioned the validity of the Agreement to Sell due to inconsistencies and lack of registration. The Tribunal noted the importance of determining the enforceability of the Agreement to Sell under relevant laws. The case was remanded to the AO to examine the enforceability of the Agreement to Sell and consider the affidavits provided. The ground was allowed for statistical purposes, and the appeal was partly allowed for statistical purposes.

Conclusion:
The Tribunal set aside the matter to the AO for re-examination of the enforceability of the Agreement to Sell and consideration of affidavits, allowing the appeal partly for statistical purposes. Grounds 1 and 2 were dismissed as infructuous.