2023 (12) TMI 931 - AT - Income Tax

Revision u/s 263 - Applicability of section 56 on disputed property as purchased from relative - Whether disputed property is purchased from relative therefore, the provision to section 56(2)(x) with explanation 56(2)(vii) is not applicable under the facts of the case, more over it not a capital asset being a rural agriculture land? - HELD THAT - It was the case of the assessee that the AO has specifically raised query regarding the said issue and it has been explained to the AO by the assessee that the land, which was purchased by the assessee, is purely a rural agricultural land situated more than 6 km. from Nagar Palika, Damoh as per the population is between 1,00,000 to 10,00,000 and the seller Mohd. Khalil alias Khalik is a relative of the assessee and in support of the above contention, a confirmation letter from the seller has also been furnished. AO accepted the said contention/clarification given by the assessee and made no addition. In our considered opinion, the said approach of the AO requires any interference u/s 263 of the Act. Increase in unsecured loan during the assessment year under consideration, the assessee had furnished 41 lenders from unsecured loans which has been taken during the year under consideration - The assessee had also furnished the bank statement of the lenders. Learned counsel for the assessee contended that the assessee had passed the three tests i.e. identity of the lenders, creditworthiness of the lenders and genuineness of the transactions, except the case of Ganga Jamuna Traders of Rs. 60,00,000/- and all the transactions are being made through bank account. The learned Assessing Officer accepted the clarification which was supported by the documentary evidence given by the assessee and made no addition. The assessee had complied and answered all the queries raised by the Assessing Officer u/s 143(2) and 142(1) of the Act by submitting satisfactory details and clarifications in respect of both the issues i.e. purchase value of the property less than the value as per stamp authority and large increase in unsecured loan during the year . Considering the fact that the assessee has discharged his initial onus by providing the supporting evidence such as confirmation, PAN Adhar Numbers of all 41 lenders and the Bank statements, the burden of the assessee is discharged which has been accepted by the A.O. Further in so far as second issue is concerned, since the assessee has purchased the land from the relative and the said contention was duly supported by the genealogical tree, and the said fact has also already been examined by the AO, thus, in our considered opinion, the order of the Pr. CIT deserves to be quashed. Accordingly, we allow the grounds of appeal of the assessee and set aside the order impugned of the Pr. CIT - Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves an appeal against an order passed under section 263 of the Income Tax Act, 1961 pertaining to assessment year 2018-19. The issues raised by the assessee include the correctness of the assessment order passed under section 143(3) and the applicability of provisions related to the purchase of a disputed property from a relative.

Assessment of Investment in Immovable Property:
During the assessment proceedings, the Assessing Officer raised a query regarding the purchase of land by the assessee for a lower consideration than the stamp duty value. The AO contended that the excess amount should be treated as income from undisclosed sources. However, the assessee explained that the land was rural agricultural land purchased from a relative, supported by a confirmation letter. The AO accepted this explanation and made no addition. The Tribunal held that the AO's approach did not warrant interference under section 263.

Unsecured Loans Issue:
The assessee had taken unsecured loans from 41 lenders during the relevant year and provided necessary documentation, including bank statements. The Assessing Officer accepted the explanation regarding the identity, creditworthiness, and genuineness of the lenders, except for a specific case. The Tribunal noted that the assessee had satisfactorily addressed all queries raised by the AO, and the order passed under section 143(3) did not require revision under section 263.

Judicial Precedent and Legal Interpretation:
Referring to a previous ITAT decision, the Tribunal emphasized that the assessee had fulfilled the onus of proving the legitimacy of the transactions by providing supporting evidence such as confirmation letters, PAN, Aadhar numbers, and bank statements. Additionally, the purchase of the property from a relative was supported by a genealogical tree and had been duly examined by the Assessing Officer. Based on these factors, the Tribunal concluded that the order of the Principal CIT should be set aside, and the appeal of the assessee was allowed.

Conclusion:
The ITAT Jabalpur allowed the appeal of the assessee, quashing the order of the Principal CIT dated 26/03/2023. The Tribunal found that the assessee had adequately addressed the issues related to investment in immovable property and unsecured loans during the assessment proceedings, and the order under section 143(3) did not warrant revision under section 263.