2023 (8) TMI 1525 - AT - Income Tax

Addition u/s 69 - CIT(A) restricted addition to the brokerage income being 2% - seized document during the search operation includes a satakat in the name of assessee as purchaser containing complete details of sellers and the assessee and his brother and contains the complete details of the property under transaction and the details of the advance payment made by assessee by way of cheques to the owners - HELD THAT - CIT(A) recorded that the assessee has given advance for purchase of said land/plots. CIT(A) on the basis of such circumstances, noted that once the assessee has given advance, getting commission on such land cannot be ruled out, thus the addition if any can be restricted to the brokerage transaction and not to the transaction of sale and purchase of land. CIT(A) held that Satakhat relied and referred by Assessing Officer was never executed as seen from the seized material. There is no other evidence relating to the transaction, found during the course of search either at the premises of assessee or from Mr. Tarnish B Kania. On the basis of such observation, the ld. CIT(A) held that the transaction of investment in the lands is not proved. However, on the same time, the circumstances suggest that the assessee has taken brokerage. On such observation, the ld. CIT(A) estimated 2% of brokerage on the transaction of Rs. 2.22 crores, accordingly restricted the addition to the extent of Rs. 4,44,961/- thereby granted substantial relief to the assessee.it is an undisputed fact that the documents relied upon for making additions were found from the third party. As no investigation was carried out by the investigating team against the assessee if the assessee has direct involvement in ultimate sale of the lands or not. There is no statement either during the search or post search enquiry or during the statement which can be proved that the transaction in these papers was ultimately resulted in the sale of the plots of land. Our view is also supported by the various case laws relied by ld AR for the assessee. Thus, no infirmity or illegality in the order passed by ld CIT(A), which we affirm with our aforesaid observation. In the result, the ground of the appeal of revenue is dismissed.

Issues Involved:
1. Legitimacy of the addition of Rs. 2,22,48,040/- under Section 69 of the Income Tax Act.
2. Evaluation of the findings and evidences presented by the Assessing Officer (AO).
3. Determination of whether the transaction was an unexplained investment or brokerage income.
4. Validity of the protective addition in the case of Vimal R. Patel.

Detailed Analysis:

1. Legitimacy of the Addition of Rs. 2,22,48,040/- under Section 69 of the Income Tax Act:
The revenue appealed against the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] who restricted the addition made by the Assessing Officer (AO) under Section 69 of the Income Tax Act to brokerage income. The AO had added Rs. 2.22 crores as unexplained investment based on a Satakhat (agreement to sell) found during a search operation. The CIT(A) concluded that the transaction was not proved as an investment but could be considered as brokerage income, estimating 2% of the transaction amount as brokerage.

2. Evaluation of the Findings and Evidences Presented by the AO:
The AO based the addition on a Satakhat found during a search at the premises of an advocate, which indicated a sale price of Rs. 2.27 crores for certain lands. The AO argued that the assessee had made an unexplained investment in the land. However, the assessee contended that the Satakhat was unsigned, found from a third party, and no incriminating material was found during the search at their premises. The CIT(A) noted that the Satakhat was never executed and there was no evidence of the transaction found during the search.

3. Determination of Whether the Transaction was an Unexplained Investment or Brokerage Income:
The CIT(A) held that the transaction of investment in the lands was not proved and restricted the addition to brokerage income. The CIT(A) observed that the assessee had given an advance for the purchase of the land, and getting a commission on such land could not be ruled out. Therefore, the addition was restricted to 2% of the transaction amount as brokerage income, amounting to Rs. 4,44,961/-.

4. Validity of the Protective Addition in the Case of Vimal R. Patel:
In the case of Vimal R. Patel, the AO had made a protective addition of Rs. 2.22 crores. The CIT(A) deleted this protective addition, reasoning that since the substantive addition in the case of Piyush R. Patel was restricted to brokerage income, the protective addition in Vimal R. Patel's case could not survive. The Tribunal agreed with the CIT(A) that the basis of the addition itself was not accepted, and thus, the protective addition was invalid.

Conclusion:
The Tribunal dismissed the appeals of the revenue, affirming the CIT(A)'s decision to restrict the addition to brokerage income and delete the protective addition. The Tribunal found no infirmity or illegality in the CIT(A)'s order and upheld the decision that the transaction was not proved as an unexplained investment but could be considered as brokerage income. The Tribunal also noted the lack of independent material to support the AO's addition and the absence of any direct involvement of the assessee in the ultimate sale of the lands.

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