2024 (8) TMI 1019 - AT - Income Tax

Unaccounted sale proceeds received towards sale of land - nature of land sold - assessee reiterated his arguments made before the AO and claimed that the impugned land sold by the appellant to M/s. Incredible India Projects (P) Ltd is an agricultural land and is situated beyond 2 kms from local Municipalit - HELD THAT - The impugned land sold by the assessee is situated beyond the specified limit of the local Municipality and thus cannot be treated as capital asset. Further, the appellant has also placed necessary evidence to prove that he has carried out agricultural operations and also declared agricultural income in the return of income filed in the earlier A.Ys. Be that as it may be, merely because the agricultural operation was not carried out in land which is otherwise an agricultural land as per revenue record and is also situated beyond the specified limit cannot be treated as capital asset, as long as the said land is capable of carrying out agricultural operations. Therefore, we are of the considered view that the land sold by the assessee to M/s Incredible India Projects (P) Ltd is an agricultural land and thus, cannot be treated as capital asset in terms of section 2(14) of the I.T. Act, 1961. CIT (A)-12, Hyderabad, while deciding the issue of taxability of sale of land in the case of Shri Raja Babu Nimmattoori for the A.Y 2018-19 has considered the very same land sold by the assessee and after considering the relevant facts including the certificate issued by the Tehsildar and certificate from the Commissioner of Bhongir Municipality held that the impugned land sold by the assessee is an agricultural land and cannot be treated as capital asset. Thus impugned land sold by the assessee is an agricultural land and is situated beyond 2 kms from the local limitation of Bhongir Municipality and thus cannot be treated as capital asset. AO and CIT (A) without appreciating the relevant facts simply made additions towards capital gain from sale of land. Decided in favour of assessee. Addition towards increase in capital account - assessee submitted that the source for increase in capital account is out of sale proceeds received from sale of agricultural land and balance amount is out of current year income - AO made additions without appreciating the relevant evidence filed by the assessee - HELD THAT - Assessee has filed necessary evidence to prove the source of the increase in capital accounts. As per explanation furnished by the assessee, sum as received from M/s. Incredible India Projects (P) Ltd towards sale of 4 acres of agricultural land. The balance amount is out of current year income after withdrawal for personal expenditure. We find that when the assessee is able to explain the increase in capital accounts with necessary evidence, in our considered view the AO ought not to have made addition by stating that the assessee is not able to furnish any evidence. CIT (A) without appreciating the relevant facts simply sustained the addition made by the AO. Since the appellant has explained increase in capital account with known sources of income and such explanation is supported by necessary evidence, in our considered view, the addition made by the AO towards increase in capital account is not sustainable. Thus, we set aside the order of the CIT (A) on this issue and direct the AO to delete the addition made towards increase in capital account. Addition towards undisclosed income arises towards amount received - We are of the considered view that the ld. CIT(A) is erred in confirming addition made by the Assessing Officer towards the advance received from M/s. Aishwarya Infra Developers as income of the assessee u/s 56(2)(ix) of the I.T. Act, 1961, even though having observed that the impugned land is an agricultural land in the case of another co-owner while deciding the appeal for the A.Y 2018-19. Thus, we set aside the order passed by the learned CIT (A) on this issue and direct the Assessing Officer to delete the additions made towards undisclosed income received from M/s. Aishwarya Infra Developers u/s 56(2)(ix). Taxability of capital gain in pursuant to JDA entered - From a plain reading of section 45(5A) of the act, it is undoubtedly clear that the capital gain, if any, is chargeable to tax in terms of specified agreement shall be levied for the previous year in which certificate of completion is issued by the competent authority. In the present case, there is no dispute with regard to the fact that the Developer has not completed the project in all respects and has not obtained a completion certificate from the competent authority. In fact, it was not a case of the Assessing Officer and the learned CIT (A) that the assessee has obtained completion certificate and even after obtaining completion certificate, capital gain was not offered to tax. Unless AO and CIT (A) proves that the conditions prescribed for u/s 45(5A) of the Act is satisfied, the question of computation of capital gain for the impugned A.Y does not arise. Therefore, we are of the considered opinion that the AO completely erred in making addition towards capital gain in pursuant to the JDA on 30.06.2017, contrary to the provisions of section 45(5A) - CIT (A) without appreciating the relevant facts simply sustained the addition made by the AO and further enhanced the assessment on the very same issue. Thus, we set aside the order passed by the learned CIT (A) and direct the Assessing Officer to delete the addition made towards computation of capital gain in terms of development agreement with JVG Structures (P) Ltd. Addition u/s 56(2)(x) - difference between the stamp duty value and consideration paid for purchase of the property - HELD THAT - Although the assessee claims to have entered into an agreement in the year 2007 and also paid part of consideration, but sale agreement was not registered and also advance has been paid by cash and thus, as per provisions of section 56(2)(x) and proviso as provided therein, the provisions of the first proviso shall apply only in a case where the amount of consideration referred to therein has been paid by way of an account payee cheque on or before the date of agreement for transfer of such immovable property. Since the appellant claims to have entered into agreement in the year 2007 and also paid the consideration in cash, the provisions of 1st proviso and consideration as on the date of the agreement cannot be applied - there is no error in the reasons given by the CIT (A) to sustain the addition made by the AO for an amount being the difference between the stamp duty value and consideration paid for purchase of property u/s 56(2)(x) of the I.T. Act, 1961. Thus, we are inclined to uphold the findings of the CIT (A) and reject the ground taken by the assessee. Addition u/s 69 - unexplained investment for purchase of land - CIT (A) deleted the consideration paid through cheques as per registered sale deed being 1/6th share of the assessee but sustained balance - HELD THAT - We find that although the Assessing Officer has made addition towards the difference amount, there is no reference as to how the said payment was made in terms of the agreement of sale dated 5.5.2017 i.e whether it is by cheque or by cash. In absence of any finding as to cash payment, then it is difficult to accept the reasons given by the Assessing Officer to make additions in the hands of the assessee, more so when the other party claims that the entire consideration has been paid from his account and the source has been explained. CIT (A) without appreciating the relevant facts simply sustained the addition made by the AO. Thus, we are inclined to reverse the findings of the learned CIT (A) on this issue and direct the Assessing Officer to delete the differential consideration of Rs. 13.00 lakhs in the hands of the assessee. Addition towards the cash found and seized during the course of search - HELD THAT - Since there are contradictory explanation, one at the stage of search proceedings and another at the stage of assessment proceedings, it is difficult to accept the explanation of the assessee with regard to the source of cash found during the course of search - it is also difficult to reject the explanation of the assessee in light of income declared by the assessee for the last 3 A.Ys. Since the appellant is not required to maintain regular cash book for his income and further as per the revised balance sheet as on 31.3.2017, sufficient cash balance is available to explain cash found during the course of search, in our considered view, a reasonable amount of cash found during the course of search can be attributable to cash in hand available with the assessee before the date of search. Therefore, we direct the AO to accept the explanation of the assessee with regard to the source for cash found during the course of search to the extent of Rs. 20.00 lakhs. The assessee gets relief to the extent of Rs. 2.00 lakhs out of additions made by the Assessing Officer at Rs. 28,06,200/-.. Unexplained cash deposit u/s 69A - assessee has made a cash deposit in his UCO Bank account - HELD THAT - CIT (A) recorded a categorical finding that the appellant has received Rs. 2,07,000/- from M/s. Aurora Educational Society on various dates towards the part repayment of loan of Rs. 4,45,00,000/- given by the appellant to the Society on 14.2.2007. The learned CIT (A) further noticed that even otherwise the income declared by the assessee for the current financial year relevant to A.Y 2018-19 is much more than the amount of cash deposit of Rs. 2,07,000/- into UCO Bank Account and the appellant is entitled to the benefit of telescoping the income to the additions made u/s 69A - findings of the facts recorded by the learned CIT (A) are not controverted with any evidence. Therefore, we are inclined to uphold the findings of the learned CIT (A) and reject the grounds taken by the Revenue. Addition of unsecured loans u/s 68 - CIT(A) deleted addition - HELD THAT - As per the revised statement of affairs filed by the assessee, there is no difference in assets shown in either of the balance sheet, whereas there is a change in capital account and loan and liabilities. On perusal of the statement of affairs, we find that there is no unsecured loan as claimed by the AsO but there is a credit under loan liability from UCO Bank. From the details filed by the assessee, it appears that there is no unsecured loan as claimed by the AO - Although the appellant himself has shown unsecured loan in the statement of affairs filed during the assessement proceedings but fact remains that the assessee has explained the mistake committed while preparing the earlier financial statements and as per explanation furnished by the assessee, there was an error and the same has been rectified by filing the correct financial statements. CIT (A), after considering the relevant evidence has rightly deleted the addition/ Addition towards increase in capital account - HELD THAT - We find that when the assessee is able to explain the increase in capital accounts with necessary evidence, in our considered view the Assessing Officer ought not to have made addition by stating that the assessee is not able to furnish any evidence - CIT (A) without appreciating the relevant facts simply sustained the addition made by the AO. Since the appellant has explained increase in capital account with known sources of income and such explanation is supported by necessary evidence, in our considered view, the addition made by the AO towards increase in capital account is not sustainable. Unexplained investment in land at Edupally Village, R.R. District - No source for consideration paid over and above what was stated in the registered sale deed provided - HELD THAT - Although the appellant claims to have explained the source out of opening cash and bank balance available as on 31.3.2017, but the revised statement of affairs filed by the assessee does not include additional consideration paid as per cash receipt. In so far as the argument of the assessee that the Assessing Officer has not confronted with the seized document and also not provided for cross examination of the vendors, in our considered view when the document found during the course of search clearly shows the signature of the vendors and further the contents also matched with the registered sale deed, then the question of providing cross examination of the vendors does not arise. We therefore, are of the view that the assessee could not explain the source for excess consideration paid over and above the consideration as per the registered sale document and thus, the AO and CIT (A) are rightly sustained the addition towards the consideration paid for purchase of property as per cash receipt. Extra consideration alleged to have been paid for purchase of the property - differential consideration as per the registered document for the A.Y 2018-19 - HELD THAT - If the claim of the AO is correct, then the additions, if any, to be made towards the differential consideration should be made for the AY 2017-18 and further the assessee needs to explain the source for said investment for the A.Y 2017-18 only. In the present case, the Assessing Officer has made addition towards differential consideration as per the registered document for the A.Y 2018-19, even though it was alleged that Rs. 1.57 crore was paid for the A.Y 2017-18. On this count itself, the additions sustained by the CIT (A) cannot be upheld. The appellant has also filed copies of bank statement of Shri N Raja Babu and others and claimed that even the balance consideration of Rs. 1.57 crores have been paid through proper banking channels and accounted in the books of account for the relevant A.Y - From the details filed by the assessee, it appears that even the additional consideration of Rs. 1.57 crores has been paid through proper banking channels and once it is proved that the payments are gone from bank accounts, it appears that the source for the said payment is already explained by the appellant. Therefore, on this count also the additions sustained by the learned CIT (A) cannot be upheld. Therefore, for the above reasons, we reverse the findings of the learned CIT (A) and direct the AO to delete the additions sustained by CIT (A) towards extra consideration alleged to have been paid for purchase of the property. Addition made towards credits found in bank account - HELD THAT - When the appellant is having sufficient income in excess of credits found in the bank account, then credits in bank account can be very well explained out of income declared in ITR. Therefore, the AO is erred in making separate addition. The learned CIT (A) after considering the relevant facts has rightly deleted the addition made by the Assessing Officer and thus, we are inclined to uphold the findings of ld. CIT(A) and reject ground taken by the Revenue. Addition made towards income from family pension - HELD THAT - The assessee has filed relevant bank statement of the assessee from 1/4/2016 to 31/03/2018 which and as per the said bank statement, the appellant has only received family pension of Rs. 1,20,000/- and the same has been disclosed in her return of income filed for the impugned A.Y. Therefore, we are of the considered view that when the appellant has received only Rs. 1,20,000/- income of family pension, it is incorrect on the part of the AO and the learned CIT (A) to assume that the assessee has received Rs. 6,60,000/- income from family pension without there being any evidences to prove this finding, more particularly when the assessee claims that for earlier A.Ys she has received arrears from family pension. Thus, we set aside the order of the learned CIT (A) on this issue and direct the Assessing Officer to delete the addition made towards income from family pension.

Summary

Issues Involved:
1. Unaccounted Sale Proceeds from Incredible India Projects (P) Ltd (Agriculture Land).
2. Undisclosed income from Aishwarya Infra Developers.
3. Increase in Capital Account as per Balance Sheet.
4. Unaccounted Sale Proceeds from JVJ Structures (P) Ltd (Joint Development Agreement).
5. Long-Term Capital Gain (sold to JVG Structures (P) Ltd - Dev Agreement 5437/2017 (Agriculture Land).
6. Section 56(2)(x) on the above (i.e., Excess of SD value over sale consideration).
7. Section 56(2)(vii)(b) on the above (i.e., Excess of SD value over sale consideration).
8. Unexplained Investment in Land at Road No.40, Jubilee Hills-69 (difference amount of sale deed and agreement to sale).
9. Cash Seized During Search.
10. Unexplained Investment in Land at Road No.41, Jubilee Hills-69 (difference between agreement to sale and sale deed).
11. Unexplained Cash Deposits.
12. Unexplained Investment in Land at Edupalle Village.
13. Disallowance claimed u/s 57.
14. Long-Term Capital Gain with 50C.
15. Family Pension Receipts.
16. Unexplained Investment in Land at Road No.12, Banjara Hills, Hyderabad 69.

Issue-wise Detailed Analysis:

1. Unaccounted Sale Proceeds from Incredible India Projects (P) Ltd (Agriculture Land):
The Tribunal found that the land sold by the assessee to M/s Incredible India Projects (P) Ltd was agricultural land situated beyond 2 kms from Bhongir Municipality. The land was not treated as a capital asset under section 2(14) of the I.T. Act, 1961. Consequently, the additions made by the Assessing Officer towards capital gains from the sale of this land were deleted.

2. Undisclosed Income from Aishwarya Infra Developers:
The Tribunal held that the advance received from M/s Aishwarya Infra Developers was not forfeited and was part of a tripartite agreement involving M/s JVG Structures (P) Ltd. Since the land was agricultural and situated beyond 2 kms from Bhongir Municipality, the provisions of section 56(2)(ix) of the I.T. Act, 1961, were not applicable. The additions made towards undisclosed income from M/s Aishwarya Infra Developers were deleted.

3. Increase in Capital Account as per Balance Sheet:
The Tribunal found that the increase in the capital account was explained by the sale proceeds received from M/s Incredible India Projects (P) Ltd and current year income. The additions made by the Assessing Officer towards the increase in the capital account were not sustainable and were deleted.

4. Unaccounted Sale Proceeds from JVJ Structures (P) Ltd (Joint Development Agreement):
The Tribunal noted that the capital gains from the joint development agreement with M/s JVG Structures (P) Ltd should be taxed in the year in which the completion certificate is issued by the competent authority as per section 45(5A) of the I.T. Act, 1961. Since the completion certificate was not obtained, the additions made towards capital gains were deleted.

5. Long-Term Capital Gain (sold to JVG Structures (P) Ltd - Dev Agreement 5437/2017 (Agriculture Land):
The Tribunal reiterated that the land sold was agricultural and situated beyond 2 kms from Bhongir Municipality. Therefore, it was not a capital asset under section 2(14) of the I.T. Act, 1961. The additions towards long-term capital gains were deleted.

6. Section 56(2)(x) on the above (i.e., Excess of SD value over sale consideration):
The Tribunal upheld the additions made under section 56(2)(x) for the difference between the stamp duty value and the sale consideration, as the assessee could not provide sufficient evidence to prove otherwise.

7. Section 56(2)(vii)(b) on the above (i.e., Excess of SD value over sale consideration):
Similar to section 56(2)(x), the Tribunal upheld the additions made under section 56(2)(vii)(b) for the difference between the stamp duty value and the sale consideration.

8. Unexplained Investment in Land at Road No.40, Jubilee Hills-69 (difference amount of sale deed and agreement to sale):
The Tribunal found that the assessee could not explain the source of the differential amount. The additions made by the Assessing Officer were upheld.

9. Cash Seized During Search:
The Tribunal accepted the explanation of the assessee for part of the cash found during the search, attributing it to past savings and declared income. Additions were partially deleted, providing relief to the extent of a reasonable amount of cash.

10. Unexplained Investment in Land at Road No.41, Jubilee Hills-69 (difference between agreement to sale and sale deed):
The Tribunal found that the assessee could not explain the source of the differential amount. The additions made by the Assessing Officer were upheld.

11. Unexplained Cash Deposits:
The Tribunal accepted the explanation of the assessee that the cash deposits were from known sources of income, including declared income and past savings. Additions were deleted.

12. Unexplained Investment in Land at Edupalle Village:
The Tribunal found that the assessee could not explain the source of the investment. The additions made by the Assessing Officer were upheld.

13. Disallowance claimed u/s 57:
The Tribunal noted that the assessee did not wish to press the ground challenging the disallowance of deduction claimed under section 57. The ground was dismissed as not pressed.

14. Long-Term Capital Gain with 50C:
The Tribunal found that the land sold was agricultural and situated beyond 2 kms from Bhongir Municipality. Therefore, it was not a capital asset under section 2(14) of the I.T. Act, 1961. The additions towards long-term capital gains were deleted.

15. Family Pension Receipts:
The Tribunal found that the assessee had provided sufficient evidence to prove that the family pension received was correctly declared. The additions made by the Assessing Officer were deleted.

16. Unexplained Investment in Land at Road No.12, Banjara Hills, Hyderabad 69:
The Tribunal found that the assessee could not explain the source of the investment. The additions made by the Assessing Officer were upheld.