2017 (1) TMI 1138 - AT - Income Tax

Undisclosed investment - Held that - AO has considered only the amount of ₹ 5,57,000/- for making addition and has not examined the other amounts, the reasons of which are not available on record. We are not sure whether those investments were made in this year or in earlier years. Be that as it may, there was a short disclosure to an extent of ₹ 11,98,400/-, out of which ₹ 5,57,000/- was considered as undisclosed in the assessment order. The explanation offered by assessee is not proper in the sense that no reasons were given, why the above amounts were not disclosed earlier. Even though a reconstructed Balance Sheet was prepared, the corresponding sources were not properly explained. Therefore, we are of the opinion that the order of the CIT(A) confirming the above amount does not require any interference. In view of that, we affirm the order of the Ld.CIT(A). Grounds on this issue are rejected. Completion of assessment U/s. 144 - Held that - No merit in the ground raised by assessee. Even though a notice U/s. 147 was issued, assessee has not filed any revised return. Even though the proceedings were completed by issuance of notices to assessee and examining the issues, technically, the assessment has to be completed only U/s. 144, as provided in sub-section 1(a). We do not find any merit in the ground. Accordingly, this ground is rejected.

Summary

Issues Involved:
1. Validity of the addition of ?1,25,500/- under Section 69 of the Income Tax Act for AY 2002-03.
2. Validity of the addition of ?5,57,000/- under Section 69 of the Income Tax Act for AY 2004-05.
3. Legitimacy of completing the assessment under Section 144 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the addition of ?1,25,500/- under Section 69 of the Income Tax Act for AY 2002-03:
The core issue was whether the assessee’s explanation regarding the investment in the Kothwalguda property amounting to ?1,25,500/- could be accepted. The AO noted that the sale deed dated 16-02-2002 indicated that the entire sale consideration of ?1,25,500/- was paid in cash. The assessee provided inconsistent explanations: initially claiming the amount was still payable as of 31-03-2002, later stating it was adjusted against amounts receivable from M/s R.K. Township Promoters (P) Limited. However, the AO and CIT(A) found these explanations unsupported by documentary evidence and confirmed the addition under Section 69 of the IT Act. The Tribunal agreed with the CIT(A)’s order, noting the assessee’s inconsistent stands and lack of proper explanation, thus dismissing the grounds raised by the assessee.

2. Validity of the addition of ?5,57,000/- under Section 69 of the Income Tax Act for AY 2004-05:
The issue revolved around the unexplained investment in a property at Yellareddyguda, Hyderabad, registered on 02.12.2003. The AO observed that the assessee declared an investment of ?20,57,900/- in the sale deed but only ?15,00,000/- in the balance sheet. The AO added ?5,57,000/- as unexplained investment under Section 69. During appeal proceedings, the assessee claimed the difference was met from personal sources and reconstructed the balance sheet. However, the CIT(A) noted that the reconstructed balance sheet simply increased "other advances" to account for the discrepancy, which was not supported by proper documentation. The Tribunal upheld the CIT(A)’s order, agreeing that the explanation was insufficient and the addition was justified.

3. Legitimacy of completing the assessment under Section 144 of the Income Tax Act:
The assessee contested the assessment completed under Section 144, arguing it should have been under Section 143. The CIT(A) clarified that since the assessee did not file a return in response to the notice under Section 148, the AO correctly completed the assessment under Section 144, considering all available information and following due procedure. The Tribunal found no merit in the assessee’s argument, affirming that the assessment was validly completed under Section 144 as per the law.

Conclusion:
The Tribunal dismissed both appeals of the assessee, upholding the additions of ?1,25,500/- and ?5,57,000/- under Section 69, and confirming the legitimacy of the assessment completed under Section 144. The order was pronounced in the open court on 18th January 2017.