2016 (10) TMI 695 - AT - Income Tax

Ex parte assessment u/s 144 - Held that - it is required to make investigation by the department against the plaintiffs as to how cash amount of ₹ 50 lakhs was available with them which they claimed to have paid to the assessee. The department has not carried out any enquiry with the plaintiffs whether any sum was available with them which was said to have been paid to assessee. Therefore, in the absence of any such enquiry and since the department did not find any cash having been possessed with the plaintiffs, it cannot be presumed that the same was paid to the assessee. Therefore taking the totality of facts and circumstances into consideration we are of the considered view that this issue has to be restored to the file of the Assessing Officer for proper and thorough examination and the assessee shall co-operate with the proceedings. Thus, we restore the issue to the file of the Assessing Officer with a direction to examine the issue thoroughly and pass appropriate orders in accordance with law after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purpose.

Issues Involved:
1. Taxation of ?52,50,000/- as undisclosed income.
2. Determination of capital gains arising from the alleged transfer of land.

Issue-wise Detailed Analysis:

1. Taxation of ?52,50,000/- as Undisclosed Income:
The primary issue revolves around the taxation of ?52,50,000/- as undisclosed income. The assessee contends that the Ld. CIT(A) erred in taxing this amount, arguing that the addition was based more on allegations than on concrete evidence. The revenue department received information from the Bombay High Court indicating that the plaintiff had paid ?50 lakhs in cash towards the sale of some property to the defendant, whose accounts were frozen by the IT Department. The High Court directed the Income Tax Department to investigate how the plaintiffs had such a large amount of cash and to take appropriate action against both parties involved.

Despite several notices issued under sections 133(6), 148, and 142(1) of the IT Act, the assessee failed to provide the required details. Consequently, the Assessing Officer (AO) conducted a best judgment assessment under section 144 r.w. Sec. 147 of the Act, bringing the alleged receipt of ?50 lakhs in cash to tax in the hands of the assessee. The Ld. CIT(A) sustained the AO's order, observing that the assessee had entered into an agreement for the sale of land on 21.03.2005 and later signed a deed of cancellation on 10.02.2006. The CIT(A) inferred that the assessee might have received the payment since the buyer enjoyed physical possession of the property from the date of the agreement until the cancellation.

The assessee argued that the physical possession of the property was never handed over, the land was compulsorily acquired by the government, and the total sale consideration was not received. The assessee also contended that the provisions of Sec. 53A of the Transfer of Property Act were not fulfilled, implying no transfer of property occurred. The Tribunal noted that none of these submissions were considered by the lower authorities and highlighted the need for a thorough investigation by the department to verify the plaintiffs' claim of having the cash amount.

2. Determination of Capital Gains Arising from the Alleged Transfer of Land:
The second issue pertains to the determination of capital gains arising from the alleged transfer of land. The Ld. CIT(A) concluded that capital gains had arisen from the transfer of land, thereby subjecting the income to tax under the head capital gains. The assessee disputed this finding, asserting that no transfer of land took place, as evidenced by the deed of cancellation and the ongoing legal disputes.

The Tribunal emphasized that the AO and CIT(A) did not properly examine several critical aspects, such as the physical possession of the property, the total sale consideration, and the compulsory acquisition by the government. The Tribunal also noted the necessity of investigating whether the plaintiffs had the claimed cash amount, as directed by the High Court.

Given the incomplete examination by the lower authorities and the pending legal proceedings, the Tribunal decided to remand the issue to the AO for a thorough and proper examination. The AO was directed to investigate the matter comprehensively, considering all relevant submissions and evidence, and to pass appropriate orders in accordance with the law after providing the assessee with an adequate opportunity to be heard.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with the Tribunal restoring the issue to the file of the AO for a detailed and proper examination. The AO was instructed to investigate the matter thoroughly and pass appropriate orders in accordance with the law, ensuring that the assessee is given an adequate opportunity to present their case.

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