2012 (10) TMI 789 - AT - Income Tax

Addition u/s 68 - Assessee purchase the property in the capacity of power of attorney holder - Subsequently, the same property was sold - The sale consideration was received in the form of DD for Rs. 90 lakhs and the remaining amount by way of cash - AO treats payment received by way of DD as the sale consideration And made addition u/s 68 for the difference amount Held that - When the assessee purchased the property the payment made to the seller was debited to the books of accounts and when he sold the same it was credited to the books of account. He paid the taxes also. These very important aspects were neither considered by the AO nor considered by the CIT(A). The assessee had purchased the property for Rs 2,71,42,870/- and sold it at Rs. 90,00,000/- the balance amount has to be considered as a business loss. Issue remits the matter back to the file of the AO to examine the issue afresh in accordance with law. Issue remand back to AO

Summary

Issues:
1. Discrepancy in sale consideration of a property in the real estate business.
2. Addition under section 68 of the Income Tax Act, 1961.

Issue 1: Discrepancy in Sale Consideration
The case involved a discrepancy in the sale consideration of a property in the real estate business. The assessee had purchased a property for Rs. 2,71,42,870 and subsequently sold it for the same amount to another party. However, the Assessing Officer raised concerns as the sale consideration was shown differently in the books of accounts. The Assessing Officer believed that the property was sold for Rs. 90,00,000 only, leading to an addition under section 68 of the Act due to the discrepancy in the amounts received. The CIT(Appeals) observed that there was no evidence to doubt the genuineness of the transaction, as registered documents were available. The cash entries in the books of accounts were treated as unexplained income and not considered as sale receipts. The CIT(Appeals) directed the Assessing Officer to allow the business loss considering the actual sale consideration received and incurred by the assessee.

Issue 2: Addition under Section 68 of the Income Tax Act
Regarding the addition under section 68 of the Income Tax Act, the Assessing Officer had invoked this section due to discrepancies in the amounts received and shown in the books of accounts. The CIT(Appeals) noted that there was no factual basis to prove that the amount received was not genuine. The Assessing Officer was directed to consider the actual sale consideration received and incurred by the assessee and compute the business loss accordingly. The Tribunal set aside the CIT(Appeals) order and remitted the matter back to the Assessing Officer for a fresh examination, providing the assessee with a reasonable opportunity to be heard. Consequently, the appeal filed by the Revenue was allowed for statistical purposes, and the cross objection by the assessee was dismissed as infructuous due to the remittance of the issue back to the Assessing Officer.

This judgment highlights the importance of accurately reflecting sale considerations in real estate transactions and the necessity for proper examination and consideration of all relevant facts before making additions under the Income Tax Act. The decision emphasizes the need for a fair and thorough assessment process to avoid double taxation and ensure justice in tax matters.