2020 (3) TMI 1034 - HC - Income Tax

Unaccounted income - Deemed income - Advance money received or determining income earned from transaction - assessee had failed to bring on record any agreement/contract essential to ascertain the genuineness of transaction or adduce evidence in support that no surplus was generated - HELD THAT - From the table reproduced, it is evident that unsecured loan was given to Sh. Sudhir Chadha and investment of ₹ 1,00,00,000/- was made in the project of M/s Gulmohar Landcon Pvt. Ltd. It was claimed that ₹ 79,00,000/- was invested with Sh. Darshan Singh who declined the said investment. There was one entry of advance made to Smt. Sumti Devi for purchase of land, it is worth noting that ₹ 55,00,000/- was paid in cash. The appellate authority while deleting the addition has taken a tubular vision of the issue involved. The only basis was that advance received cannot be treated as income, the aspects mentioned in the above para were not considered. It was not merely that the advance received was treated as income, the addition was made as the said money was used for purpose other than procuring the land for TATA Housing Development Company's project and no document/ evidence was produced to support the claim that there was no surplus being generated from the said advance. The aspect that the assessee was getting the sale deeds executed as G.P.A. of the land owners was totally ignored. The assessee successfully by with-holding the information which was in his possession, avoided the scrutiny. The agreement of authorisation was not produced during the assessment proceedings or in the appellate proceedings thereby avoiding further investigation, the same has now been produced before this Court. Deletion of addition cannot be sustained. However, as now the agreement has been produced, the matter is remitted back to the assessing officer to decide the issue afresh after providing opportunity to the assessee. It is clarified that anything recorded hereinabove shall not be construed by the assessing officer as expression on merits of the issue while deciding the remand.

Summary

Issues involved:
Deletion of addition made of ?4,46,75,000.

Analysis:
1. The appeal was filed against the order of the Income Tax Appellate Tribunal regarding the deletion of an addition of ?4,46,75,000 made by the assessing officer for advance money received. The primary questions of law revolved around the genuineness of the transaction with M/s Hash Builders Pvt. Ltd. The key contention was the failure of the assessee to provide essential documentation to ascertain the legitimacy of the transaction and the utilization of the advance money.

2. The facts revealed that the assessee was authorized to procure land for a project by TATA Housing Development Company through M/s Hash Builders Pvt. Ltd. The assessing officer added the amount of ?4,46,75,000 to the income, which was later deleted by the first appellate authority. The subsequent appeal led to the Tribunal upholding the deletion, prompting the current appeal.

3. The Revenue argued that the advance amount was not utilized for the intended purpose and crucial documents were not provided to substantiate the transaction's authenticity. On the other hand, the assessee contended that the advance received should not be considered as income, citing specific sections of the Income Tax Act and emphasizing the non-applicability of certain amendments.

4. Despite claims and counterclaims, it was revealed that the assessee failed to produce crucial documents such as the agreement of authorization and comply with requests for information. The assessing officer highlighted various transactions where the advance amount was diverted for other purposes, casting doubt on the genuineness of the transaction with M/s Hash Builders Pvt. Ltd.

5. The Tribunal's decision to delete the addition was criticized for overlooking crucial aspects of the case, particularly the diversion of funds and lack of evidence to support the claim of no surplus generated from the advance. The failure to consider the execution of sale deeds as General Power of Attorney and incomplete documentation raised significant doubts.

6. Considering the lack of cooperation and withholding of information by the assessee, the Court found the deletion of the addition unsustainable. However, with the subsequent production of the agreement of authorization, the matter was remitted back to the assessing officer for fresh consideration, emphasizing the need for a thorough review.

7. Ultimately, the appeal was allowed, highlighting the importance of providing complete and authentic documentation to support financial transactions and income declarations.