2020 (6) TMI 79 - HC - Income Tax

Unexplained investment in the purchase of property - Addition made u/s 69 merely on casual diary noting - Independent enquiry should be made by the Department on the market value of the property - Whether entire addition of unaccounted investment under Section 69 of Income Tax Act in the hands of the appellant, when the appellant was only holding 50% interest as co-owner of the said house property? - adjudication done under Section 47 (A) (1) of the Indian Stamp Act - HELD THAT - A perusal of the order passed by the CIT (Appeals) dated 01.03.2019 as well as the original order dated 08.11.2019 passed by the Income Tax Appellate Tribunal did not deal with the aspect as to the adjudication done under Section 47 (A) (1) of the Indian Stamp Act. As appears from the materials placed in the form of additional typed set of documents dated 04.03.2020 filed by the appellant / assessee that challenging the adjudication done by the Special Deputy Collector, Salem, dated 19.08.2011, further appeal was filed under Section 47 (A) (5) of the Indian Stamp Act before the Chief Commissioner (Stamp), Salem and the value of the site fixed at ₹ 545 per sq.ft has been increased to ₹ 600 per sq.ft and it was also complied with. In the considered opinion of this Court, the said order passed by the statutory authority would definitely have a bearing on the adjudication done by the authorities below and despite the fact that specific ground has been raised before the CIT (Appeals) as well as before the ITAT, the said grounds have not been considered and adjudicated. Therefore, the following substantial question of law raises for consideration Whether the order of CIT (appeals) dated 01.03.2019, as confirmed by the impugned order of ITAT dated 08.11.2019, as to the non consideration of adjudication done under Section 47 (A) (1) of the Indian Stamp Act as well as adjudication done by the Chief Revenue Officer / Inspector General of Registration, Chennai 28 in the appeal filed under Section 47 (A) (5) of the Indian Stamp Act, is sustainable in law? Substantial Question of Law framed is answered in affirmative in favour of the appellant / assessee,

Summary

Issues Involved:
1. Assessment of undisclosed income based on seized diary entries under Section 132 of the Income Tax Act.
2. Legal validity of retracted confession obtained under Section 132(4) of the IT Act.
3. Addition made under Section 69 of the Income Tax Act based on diary entries without corroborative evidence.
4. Consideration of independent enquiry for market value assessment.
5. Determination of ownership share in a property for tax assessment purposes.
6. Dismissal of Miscellaneous Petition under Section 254(2) of the IT Act.
7. Adjudication under Section 47 (A) (1) of the Indian Stamp Act.

Analysis:

1. The appellant, an individual assessee, filed a return of income for the assessment year 2009-2010 following a search conducted under Section 132 of the IT Act. The seized Executive Diary contained entries indicating unexplained investments. The CIT (Appeals) and the ITAT confirmed the assessment order, considering the voluntary and retraction statements made by the assessee under Section 132(4) of the IT Act. The appellant challenged the order, raising substantial questions of law regarding the assessment of undisclosed income based on diary entries.

2. The appellant contested the legality of the order, arguing that the confession obtained at odd hours was not valid and should not be relied upon as evidence. The appellant also questioned the addition made under Section 69 of the Income Tax Act solely based on diary entries without any corroborative material, asserting that the entries were projections and not actual transactions.

3. The appellant further raised concerns about the lack of independent enquiry by the Department to ascertain the market value of the property, emphasizing the need for corroborative material to substantiate the value determined. Additionally, the appellant argued that as a co-owner with a 50% interest in the property, the entire unaccounted investment should not be attributed solely to them.

4. The appellant also challenged the dismissal of the Miscellaneous Petition filed for rectification under Section 254(2) of the IT Act, highlighting the failure to adjudicate on the grounds raised in the appeal. The appellant sought a review of the non-considered order by the ITAT without addressing the grounds of appeal.

5. Upon careful consideration, the Court noted that the orders by the CIT (Appeals) and the ITAT did not address the adjudication under Section 47 (A) (1) of the Indian Stamp Act. The Court found that the valuation fixed by the Chief Commissioner under the Stamp Act could impact the assessment and should have been considered. Consequently, the Court framed a substantial question of law regarding the non-consideration of the Stamp Act adjudication, ruling in favor of the appellant.

6. As a result, one of the appeals was partly allowed, setting aside the ITAT's order and remanding the matter for fresh consideration. The Court emphasized the importance of addressing all relevant adjudications and upheld the appellant's right to challenge the assessment based on comprehensive legal considerations.