2023 (9) TMI 750 - AT - Income Tax

Addition u/s 69C - unexplained source of income incurred towards purchase of the land - as submitted assessee had not paid a single penny in cash and the entire share of the transaction was routed through the bank accounts and the entire share of on money was admitted to be paid by the co-owners - HELD THAT - As search action against Mr. Baldevbhai Patel was not based for reopening of assessee s case and assessee as well as co-owners i.e. Shri Baldevbhai Patel and Saileshbhai Patel had admitted that the share of three purchasers was 60 20 20 respectively was there as Shri Baldevbhai Patel and Sailseshbhai Patel and Shri Manish Ramanbhai Patel i.e. assessee. The additional amount paid in cash on money was admittedly paid by the other two-owners and not by the assessee as per the reply filed by the assessee during the assessment proceedings. In fact, the assessee s portion of share only 20% i.e. of 1,77,000/- and CIT(A) has categorically observed that both co-owners has challenged the ratio of land holdings amongst co-owners who challenged addition of on money on the ground that money received earned on sale of land were utilized by said co-owners for making money payment of land. This explanation was not taken into consideration by the Assessing Officer as well as by the ld. CIT(A) and thus in fact charging/making 20% addition was not justified and therefore the appeal of the assessee is allowed.

Summary

Issues involved:
The appeal is against the order dated 19-08-2016 passed by ld. CIT(A) for assessment year 2009-10.

Issue 1: Addition of INR 13,07,000
The AO allowed an addition of INR 13,07,000 in the hands of the assessee, despite the payment being made by co-owners and accepted on record. The AO erred in law by not considering that the payment was made by the co-owners.

Issue 2: Addition of Rs. 11,30,000 under section 69C
The AO made an addition of Rs. 11,30,000 under section 69C of the Income Tax Act, 1961 as unexplained income incurred towards land purchase. The assessee contended that the entire transaction was through bank accounts and the co-owners admitted to paying the "on-money." The CIT(A) erred in confirming this addition without proper consideration of facts.

Issue 3: Addition of INR 1,77,000 towards stamp-duty
An additional INR 1,77,000 was added presuming share paid towards stamp-duty, despite one co-owner admitting sole payment. The assessee argued that the payment arrangement was accepted by all parties involved, and the addition was not justified.

Key Judgments and Rationale:
- In the case of PCIT v Bhagwanbhai K. Patel (2019), it was held that an assessee is liable to explain the sources for their share in a transaction. The assessee justified their payment for the transaction, supported by cross-examination of facts.
- Referring to CIT, Kottayam v. Sree Ganesh Trading Company (2019), it was emphasized that if the source of funds of a donor/creditor was doubted, the addition should be made in their hands. The addition in the present case was deemed unjustified as the payment arrangement was acknowledged by all parties involved.

Judgment:
The Tribunal allowed the appeal, noting that the assessee's portion of share was only 20% and the addition of Rs. 1,77,000 towards stamp-duty was not justified. The co-owners' challenge to the ratio of land holdings and the explanation regarding the on-money payment were not considered by the AO and CIT(A). Therefore, the appeal of the assessee was allowed, and the addition was deemed unwarranted.

Separate Judgment by Ms. Suchitra Kamble, Judicial Member: The appeal was allowed, and the addition of Rs. 1,77,000 was deemed unjustified based on the explanations provided by the assessee and the co-owners.