2012 (9) TMI 231 - AT - Income Tax

Addition made u/s 69B as unexplained investment Can AO made addition on the basis circle rate of property Whether Sec. 50C is applicable on purchaser Assessee purchase agricultural land as stock in trade AO found difference between circle rate & purchase rate of property - AO made addition by invoking Sec. 50C, Sec 142A & Sec. 69B as unexplained investment - Held that - As the AO made addition on the basis of a presumption which according to I.T. Act can only be raised against seller, cannot be made in the hands of the purchaser. And provisions of sec. 142A cannot be applied against a transaction which is stock in trade. Decision in favor of assessee. Addition made on account of tripartite sale Whether in real estate business tripartite sale on basis of MOU is business income or income from other source - Held that - Assessee duly account for the income as business income The assessee is into the business of real estate and a tripartite property deal was a business transaction and the difference of earning revenue from MOU has been duly offered as business income. Decision in favor of assessee.

Summary

Issues:
1. Addition of unexplained investment under Sec. 69B
2. Addition of income from other sources

Analysis:
1. Addition of unexplained investment under Sec. 69B:
- The Assessing Officer (AO) invoked Sec. 50C and 69B of the I.T. Act to add &8377; 35,11,000 as unexplained investment due to the difference between the purchase price and circle rate of properties.
- The AO referred the matter to the Valuation Officer under Sec. 142A and justified the addition based on circle rates.
- The CIT(A) deleted the addition citing lack of evidence and unsupported basis for the addition, supported by case laws favoring the assessee.
- The CIT(A) held that the AO's addition solely based on circle rates was unjustified without any concrete evidence, thus deleting the addition.

2. Addition of income from other sources:
- The AO treated a transaction of &8377; 63,00,000 as income from other sources instead of a business transaction, leading to an addition.
- The CIT(A) disagreed with the AO, considering the transaction as a business deal and deleting the addition after verifying the accounts.
- The CIT(A) confirmed a separate addition of &8377; 50,000, which the assessee accepted, but deleted the larger addition of &8377; 63,00,000.
- The Tribunal upheld the CIT(A)'s decision, emphasizing that the transaction was part of the regular business activities of the assessee and the profit was already declared in the books of accounts.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on both issues. The Tribunal found no merit in the revenue's contentions and supported the CIT(A)'s reasoning, ultimately ruling in favor of the assessee.