1994 (3) TMI 124 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reassessment made on 29th March, 1990.
2. Sustenance of the addition of Rs. 12,28,680 as unexplained investment in agricultural land.
3. Sustenance of the addition of Rs. 75,000 towards expenditure incurred in connection with the purchase of the agricultural land.
4. Upholding of the addition of Rs. 12,000 towards household expenses.

Detailed Analysis:

1. Validity of the Reassessment:
The assessee's authorized representative withdrew the ground relating to the reopening of the assessment during the hearing. Consequently, no decision was provided on this issue.

2. Sustenance of the Addition of Rs. 12,28,680 as Unexplained Investment:
The assessee's representative argued that the addition was based on mere suspicion without any cogent and reliable evidence. It was contended that the assessee was considered a benamidar, and the real owner was his brother, which should negate the addition. The Tribunal noted that the AO did not specify whether the provisions of Section 69 or 69B were invoked. However, it was inferred that Section 69B was likely applied, which requires three cumulative conditions: the existence of an investment, expenditure exceeding the recorded amount, and unsatisfactory explanation from the assessee. The Tribunal found no credible evidence to support the AO's conclusion that the assessee paid more than recorded in the sale deed. The addition was based on an assumed yield from the agricultural land, which was deemed improper. The Tribunal cited the Supreme Court's decision in K.P. Varghese vs. ITO and the Ahmedabad Bench's decision in Gautam Laljibhai Gajjar vs. ITO, emphasizing the need for factual evidence rather than assumptions. Given the AO's conclusion in a related assessment that the assessee was not the real owner, the Tribunal directed the deletion of the entire addition of Rs. 12,50,000.

3. Sustenance of the Addition of Rs. 75,000 towards Expenditure:
The Tribunal found that the addition was made on suspicion without valid material. However, recognizing that the assessee had no ostensible source for certain expenses related to the purchase of the agricultural land, the Tribunal estimated a sum of Rs. 5,000 as reasonable expenditure for stamp-paper, registration charges, and other incidental expenses. The Tribunal directed the AO to add this amount instead of the Rs. 75,000 sustained by the CIT(A).

4. Upholding of the Addition of Rs. 12,000 towards Household Expenses:
The Tribunal agreed with the lower authorities that the assessee failed to satisfactorily explain how household expenses were met in the absence of any withdrawal. Therefore, the addition of Rs. 12,000 towards household expenses was confirmed.

Conclusion:
The appeal was partly allowed. The Tribunal directed the deletion of the Rs. 12,50,000 addition as unexplained investment in agricultural land, reduced the addition for expenditure to Rs. 5,000, and confirmed the Rs. 12,000 addition for household expenses.