2024 (4) TMI 734 - AT - Income Tax

Addition u/s 69 - AO made addition merely on the reasoning that the payment of consideration was not disclosed - assessee before the CIT(A) contended that the lands purchased by it through sale deed was not disclosed in the books as the consideration was not paid due to dispute - CIT(A) after considering the facts in totality confirmed the addition made by the AO - HELD THAT - There is no dispute that the land in question was purchased by the assessee much earlier through the sale deed and payment for the same was made subsequently. Generally such transactions are against the prevailing market forces/ practices. Under standard conditions the buyer needs to make the payment to the vendor on or before the registration of the sale deed. There can always be exceptions to such kind of prevailing market practices but the same can be accepted if there is some reasonable justification. We note that in the case of CIT versus Lubtec India Ltd 2007 (7) TMI 281 - DELHI HIGH COURT has observed that the provisions of section 69C of the Act are applicable with respect to the expenditures which have actually been incurred by the assessee and the assessee fails to offer any explanation about the source of such expenditure. From the judgement it s transpired that actual expenditure the source of which has not been explained should have been incurred for attracting the deeming provisions provided u/s 69 of the Act. In the present case there were several justifiable factors for the delayed payment against the purchase of land. These justifiable factors have been elaborated in the preceding paragraph and the same has not been doubted by the revenue authorities. Thus in such facts and circumstances we are of the view that the addition cannot be made in the hands of the assessee merely on the reason that the assessee got the property transferred through registered sale without making the payment to the vendor. There was no document brought on record by the Revenue suggesting that the assessee has incurred the expenses in connection with the purchase of land in cash so as to apply the provisions of section 69 of the Act. As such the provisions of section 69 of the Act cannot be attracted in the light of the discussion held in the case of Lubtec India Limited. (supra). Thus addition directed to be deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 95,47,000/- under Section 69 of the Income Tax Act, 1961.

Summary:

Issue 1: Confirmation of Addition under Section 69 of the Act

The captioned appeal was filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad, arising from the assessment order passed under Section 143(3) of the Income Tax Act, 1961, relevant to the Assessment Year 2015-2016.

The only effective issue raised by the assessee was that the learned CIT(A) erred in confirming the addition of Rs. 95,47,000/- under Section 69 of the Act. The assessee, a private company, engaged in wholesale trading of vegetables, was found by the AO to have purchased two immovable properties for Rs. 95,47,000/-, which were not disclosed in the books of accounts. The AO, after verification, concluded that the consideration was paid from unaccounted sources and made an addition of Rs. 95,47,000/- on account of unaccounted income used for the purchase of the land property.

The assessee contended before the learned CIT(A) that the lands purchased through the sale deed were not disclosed in the books as the consideration was not paid due to a dispute. The payment was made after the assessment order through RTGS on 29th March 2018. The learned CIT(A), however, confirmed the addition made by the AO, observing that the appellant's arguments appeared to be an afterthought.

Upon appeal, the assessee argued that there was a long-standing business relationship between the assessee group and the vendors, and the payment for the land was delayed but eventually made through the banking channel. The assessee emphasized that no unaccounted investment was made and no documentary evidence suggested that payment was made in cash.

The Tribunal noted that the land was purchased through a sale deed, and payment was subsequently made, which deviated from standard market practices but could be justified by the long-standing business relationship between the parties. The Tribunal also referenced the judgment of the Hon'ble High Court of Gujarat in the case of Commissioner of Income Tax versus Shri Babul Harivadan Parikh, which upheld that suspicion cannot replace legal proof.

The Tribunal concluded that there was no documentary evidence to suggest that the assessee incurred expenses in cash for the land purchase, and thus, the provisions of Section 69 of the Act could not be applied. Consequently, the Tribunal directed the AO to delete the addition of Rs. 95,47,000/-. The appeal filed by the assessee was allowed.

Order pronounced in the Court on 14/02/2024 at Ahmedabad.