2020 (4) TMI 187 - AT - Income Tax

Unexplained investment in purchase land - on-money payment - Addition relying on the statement of some of the sellers of land to the assessee - HELD THAT - Both the lower authorities namely, the Ld. CIT(A) as well as the AO have failed to bring anything on record to prove conclusively, that the allegation of payment of on-money is in consonance with circle rate or with valuation of the land by Stamp Duty Authority. The addition is also not based on valuation of land by any registered valuer. The addition is also not based on any report of Valuation Officer. The lower authorities have also failed to bring any material on record to show that the addition is justified on the basis of fair market value of the land.- no material to even indicate that the true value of land commanded a figure higher than what is reported by the assessee. - Additions deleted. Addition being cash deposited in bank account of the lender - HELD THAT - From perusal of records, we find that the assessee has conclusively proved that the assessee took loan from Mr. Rahul Kalsi, the loan creditor, for the purpose of purchasing the aforesaid piece of land and has explained the source of funds for purchase of the aforesaid piece of land, the loan creditor has also submitted Loan Confirmation Certificate, which is part of record. From the perusal of record we find that the assessee has proved the identity of the loan creditor, the capacity of the loan creditor and the genuineness of the loan transaction. - Moreover, there is no provision under law prohibiting the loan creditor to make direct payment to the seller of land. - Additions deleted. Addition on account of low drawings for household expenses - HELD THAT - This addition is based on estimated monthly household expenses of ₹ 30,000/- per month. On perusal of records, and having regard to facts and circumstances of the case, we are of the view that this estimate made by AO cannot be said to be excessive, unreasonable or high pitched. Therefore, this addition made by the AO, and sustained by the Ld. CIT(A) is hereby confirmed.

Summary

Issues:
1. Addition of unexplained investment in purchase land
2. Addition of cash deposited in the bank account of lender
3. Addition on account of low drawings for household expenses

Issue 1: Addition of unexplained investment in purchase land

The Assessing Officer initiated proceedings under Section 147 of the Income Tax Act based on an agreement found during a search at a third party's premises. The AO made additions totaling &8377; 81,84,000, including &8377; 7,00,000 as unexplained investment in land. The CIT(A) sustained this addition. However, the ITAT noted that no evidence was provided to link the alleged on-money payment to the circle rate or land valuation. No valuation report or material was presented to justify the addition. Consequently, the ITAT deleted the &8377; 7,00,000 addition, as it lacked substantiation.

Issue 2: Addition of cash deposited in the bank account of lender

The AO added &8377; 4,08,000, part of the amount borrowed by the assessee for land purchase, deposited in the lender's bank account. The CIT(A) upheld this addition. However, the ITAT found that the assessee proved the loan from the lender, supported by a Loan Confirmation Certificate. The ITAT highlighted the genuineness of the transaction and the lender's identity and capacity. The ITAT noted that the CIT(A) accepted the rest of the loan amount, contradicting the addition of &8377; 4,08,000. Therefore, the ITAT deleted this addition, as it was unfounded.

Issue 3: Addition on account of low drawings for household expenses

The AO made an addition of &8377; 3,24,000 for low drawings for household expenses, estimating monthly expenses at &8377; 30,000. The ITAT reviewed the case and found the AO's estimate reasonable. Consequently, the ITAT confirmed this addition, as it was not deemed excessive or unreasonable. The ITAT partially allowed the appeal for statistical purposes.

In conclusion, the ITAT ruled in favor of the assessee by deleting the additions of &8377; 7,00,000 and &8377; 4,08,000, while confirming the addition of &8377; 3,24,000 for low household expense drawings. The judgment was pronounced on August 22, 2019.