2024 (7) TMI 578 - AT - Income Tax

Unexplained investment in the purchase of land - land has been purchased by the society in its name or trustees - CIT(A) consider that the money is not paid by the society out of income but sourced from office bearers of the assessee society Shri Joginder Singh Sunda and Shri Piyush Sunda - AO noted that why an Individual will invest his unaccounted money in a property of society when he cannot gain or earn from the same for his own benefit and property become a public property, thus held that the amount shown in sale deed is unexplained investment of the society itself and claiming the same as undisclosed income of office bearers are nothing but an eye wash. HELD THAT - As it is evident from the finding of the Interim Board of Settlement/IBS wherein the objection of the revenue was considered even though based on the overall facts presented before the IBS the capitalization was allowed. IBS also noted that the society has no income for payment towards purchase of land and also there is no reference of society in the seized material. This fact recorded in the order of the IBS is not controverted by the revenue by bringing any contrary evidence, so we do not see any reason not allow that benefit of the investment to the trustees. Not only that there is no finding in the order of the lower authority that there is unaccounted income of the assessee trust, but contrary to that the IBS has accepted the additional income of the trustees and considered the utilization of that additional income with that of the investment made while purchasing the land in the name of the assessee trust, and trustees have been found the record of the on money and not the assessee trust. Thus, we see no infirmity in the finding of IBS allowing the benefit of on money paid by the trustee for the land purchase of land in the name of the assessee trust. CIT(A) has not appreciated the fact that two brother though has no legal right on the land purchased by the assessee but it is incorrect on part of Ld. CIT(A) to observe that no documentary or corroborative evidence has been filed to show that the money flowed from the two individuals when the working of the on money is found from the mobile of Shri Joginder Singh Sunda. The source for making the payment once considered in the hands of that two brother and trustees as it is evident form the order of the IBS the same sourced investment again cannot be taxed in the hands of the assessee. As regards the non-submission of the statement recorded, the same were not submitted as there is no question raised by the search team. This contention was raised by the assessee was not controverted by the ld. DR. Further no material has been brought on record by the lower authorities to establish that the cash as per the cash flow statement has been spent elsewhere. Therefore, it cannot be presumed by CIT(A) that the same was not available in payment of on money by these persons. In fact, it is the onus of the ld. AO to prove that the same has been spent elsewhere. Thus, considering the overall facts presented, content written in the seized document found from Shri Joginder Singh Sunda we are of the considered view that the payment of on money paid for purchase of land cannot be added in the hands of the assessee trust. Based on these observations ground no. 1 raised by the assessee is allowed.

Summary

Issues Involved:
1. Unexplained investment in the purchase of land.
2. Applicability of the amended tax rate under Section 115BBE.
3. Examination of the applicability of sections 271D/271E.

Detailed Analysis:

1. Unexplained Investment in the Purchase of Land:

The assessee, a charitable society, was involved in a search and seizure operation by the Income Tax Department. During the search, documents and a sale deed were found indicating the purchase of land for Rs. 15,00,000, whereas the actual consideration was Rs. 1,92,17,000, leading to a discrepancy of Rs. 1,77,67,000. The assessee claimed that this difference was paid by its trustees, Jogendra Singh Sunda and Piyush Sunda, out of their undisclosed income, which they had offered for tax before the Settlement Commission. The Assessing Officer (AO) rejected this explanation, adding the amount as unexplained investment under Section 69 of the Income Tax Act, stating that the society, being a non-profit entity, could not have received such an investment from individuals.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the society did not provide sufficient evidence to prove the source of the investment. The CIT(A) also noted that the order of the Interim Board of Settlement (IBS), which accepted the trustees' disclosure of additional income, did not apply to the society.

Upon appeal, the tribunal noted that the trustees had indeed disclosed the additional income used for the land purchase before the IBS, which had accepted this disclosure. The tribunal found that the society had no other source of income to make such a payment and that the investment was indeed made by the trustees. Consequently, the tribunal allowed the appeal, deleting the addition made under Section 69.

2. Applicability of the Amended Tax Rate under Section 115BBE:

The assessee contested the application of the amended tax rate of 60% under Section 115BBE, arguing that the amendment, which received presidential assent on 15.12.2016, should not apply to the assessment year 2017-18. The CIT(A) rejected this argument, citing judicial precedents that upheld the applicability of the amended rate from 01.04.2017.

The tribunal, however, referred to a decision by the ITAT Jabalpur Bench, which interpreted the amendment as applicable from 15.12.2016, thereby affecting transactions made after this date. Since the disputed amount was paid on 30.06.2016, prior to the amendment, the tribunal concluded that the tax rate of 30%, as applicable before the amendment, should apply. However, as the primary issue was resolved in favor of the assessee, this ground became moot.

3. Examination of the Applicability of Sections 271D/271E:

The CIT(A) directed the AO to examine the applicability of sections 271D/271E, which pertain to penalties for accepting or repaying loans or deposits in cash exceeding the prescribed limit. This direction was based on the acknowledgment that the trustees had paid the amount on behalf of the society. The tribunal, while allowing the primary appeal, did not specifically address this issue, as it was ancillary to the main contention regarding the unexplained investment.

Conclusion:

The tribunal allowed the appeal, deleting the addition of Rs. 1,77,67,000 made under Section 69, recognizing the trustees' disclosure of additional income before the Settlement Commission. The issue of the amended tax rate under Section 115BBE was rendered moot, and the direction to examine sections 271D/271E was noted but not specifically adjudicated. The decision in the lead case was applied mutatis mutandis to the related appeal, resulting in both appeals being partly allowed.