2018 (7) TMI 578 - AT - Income Tax

Unexplained investment in the bank accounts - Held that - The amount was advanced for purchase of landed properties by the assessee s relatives out of their NRE bank accounts, the same was received back by the present assessee. However, this fact has not been verified by the lower authorities. In our opinion, the assessee has to place the copies of NRE bank accounts of his relatives along with the details of refund received on cancellation of the agreements with various parties for purchase of landed properties. Accordingly, we remit this issue to the file of the AO for de novo examination of the documents mentioned above after affording opportunity of hearing to the assessee. If there is no agreement entered with the various parties, the payments made by the assessee s relatives to the vendor and refund from them is to be substantiated by the assessee. Thus, this ground of appeal of the assessee is partly allowed for statistical purposes. Addition towards receipt of commission on real estate business - Held that - If the assessee has actually acquired the property for himself, then only the question of computation of capital gain arises in the hands of the assessee. Accordingly, we remit this issue to the file of the Assessing Officer to re-examine the issue afresh and bring to tax only short term capital gain, if so, after giving deduction of cost towards acquisition and transfer of the said property. If the said property was acquired on behalf of Shri Anil Kumar Sharma and thereafter transferred to Shri Anil Kumar Sharma, then there cannot be any capital gain in the hands of the assessee and income on this transaction is to be estimated at 2% on this also. Accordingly, we direct the Assessing Officer to compute the income of the assessee as above. Thus, this ground of appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Condonation of Delay in Filing Appeals
2. Addition of ?23,42,600 as Unexplained Investment
3. Addition of ?1,50,42,950 as Receipt of Commission on Real Estate Business

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The assessee filed appeals with a delay of 423 days, citing the illness and eventual death of their Chartered Accountant as the reason. The Tribunal found the delay to be due to a genuine and sufficient cause and thus condoned the delay, admitting the appeals for adjudication.

2. Addition of ?23,42,600 as Unexplained Investment:
The Assessing Officer (AO) had information that the assessee entered into an agreement to procure land and received substantial amounts through banking channels. The AO noticed unexplained cash deposits in the assessee's bank accounts, which the assessee claimed were refunds from property deals conducted on behalf of relatives. The AO rejected this explanation due to lack of plausible evidence and treated the deposits as unexplained investments. The CIT(A) upheld this addition, noting the absence of clinching evidence linking the deposits to refunds of advances for property purchases. The Tribunal remitted the issue to the AO for de novo examination, requiring the assessee to substantiate their claim with copies of NRE bank accounts and details of refunds received.

3. Addition of ?1,50,42,950 as Receipt of Commission on Real Estate Business:
The AO assessed the assessee's income from property transactions, noting discrepancies between the amounts received and paid for land procurement. The AO treated the difference as business profit. The CIT(A) considered the assessee as an agent, not a trader, and reduced the addition by estimating 50% of the money in the bank account as utilized for land purchases. The Tribunal found this estimation incorrect, asserting that an agent's income should be around 2% of the transaction value, not 50%. The Tribunal directed the AO to reassess the income at 2% of the transaction value and to re-examine the short-term capital gain issue, considering whether the property was acquired on behalf of a third party.

Conclusion:
The Tribunal partly allowed both appeals for statistical purposes, remitting the issues back to the AO for further examination and proper computation of income based on the guidelines provided.