2021 (4) TMI 899 - AT - Income Tax

Addition on protective basis u/s. 69A - CIT(A) has deleted addition made on protective basis holding that addition on substantive basis has been carried out in the case of Shri Mehul Mehta on the basis of order of Settlement Commission therefore action of the Assessing Officer to make addition on protective basis in the case of the assessee was treated as unjustified - HELD THAT - As explained that amount was returned by the broker through whom the transaction was undertaken. In this regard, a copy of affidavit of Satyam Amitbhai Padihar, broker in the land dealing was furnished during the course of assessment proceedings. It is further noticed that the impugned land was ultimately sold on 19th August, 2016 to other parties. CIT(A) has also stated that considering the nature of transaction only substantive addition can be made in the hands of the buyer and in the hands of the seller on the reasoning that if payment was made by the buyer not out of disclosed sources the amount has to be added as undisclosed income to the total income of the buyer on substantive basis and at the same time if the receipt of consideration is not disclosed by the seller, the amount has to be added as undisclosed income to the total income of the seller on the substantive basis only. As undisputed fact that Shri Mehul Mehta in whose hands the addition was made on substantive basis had made relevant disclosure in the application for settlement which has been considered by the settlement commission in the order dated 17th Nov, 2017 u/s. 245D(iv) as elaborated in the finding of ld. CIT(A). In view of the above fact and circumstances, we do not find any infirmity in the decision of ld. CIT(A) in deleting the similar addition made in the hands of the assessee on protective basis. Therefore, this ground of appeal of the revenue stands dismissed. Addition u/s 68 - assessee has received unsecured loan - AO held that assessee has failed to establish the identity and creditworthiness of the lender and genuineness of the transaction - CIT-A deleted the addition - HELD THAT - During the course of appellate proceedings before ld. CIT(A) the assessee has filed additional evidences which were admitted by the ld. CIT(A) and remand report was also called from the Assessing Officer. The Assessee explained that confirmation of the lender could not be obtained as he was not available at that relevant point of time. However after abled to contact the lender the necessary detail in support of the transaction i.e. copy of 7/12 of agricultural land owned by the lender, copy of bank statement of the lender and confirmation of the lender were obtained. Accordingly, the assessee furnished additional evidences which were in the nature of bank statement, confirmation containing his detailed address, documentary evidences of the ownership of agricultural land and it was also explained that since lender was an agriculturist therefore he was not liable to file any return of income. The loan was received from normal banking channel as evident from the bank statement there was no cash deposited in the account of the assessee prior to giving of the loan. The Assessing Officer has not brought any material or evidences on record to disprove the aforesaid facts and evidences submitted by the assessee in support of genuineness of the loan transactions. - Decided against revenue.

Summary

Issues Involved:

1. Deletion of addition of ?3,52,93,962/- made by the Assessing Officer on protective basis under Section 69A of the Income Tax Act.
2. Deletion of addition of ?4,00,000/- on account of unexplained credit as per provisions of Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

Ground No. 1: Addition of ?3,52,93,962/- on protective basis under Section 69A of the Act

During a search at the residence of an individual on 19th July 2013, a banakhat (agreement) dated 28th March 2012 was found and seized. The banakhat was between a buyer from the Mehta Group and three sellers for a land transaction with a sale consideration of ?23,29,36,385/-. The buyer had made a payment of ?5,82,34,906/-. The search also extended to the residential premises of the two original landowners, who admitted to receiving the payment but did not declare it in their books of account or returns of income. The Assessing Officer (AO) added 40% of ?8,82,34,906/- (i.e., ?3,52,93,962/-) as unexplained income under Section 69 of the Act on a protective basis.

The CIT(A) deleted this addition, holding that the substantive addition had been made in the case of the buyer based on the order of the Settlement Commission. The CIT(A) reasoned that in sale-purchase transactions, amounts not disclosed by respective parties should be added substantively only in the respective hands. The CIT(A) noted that the transaction did not materialize, the land was not transferred, and the amount was returned, thus no tax liability arose as per the provisions of the Income Tax Act and the Transfer of Property Act. Consequently, the CIT(A) directed the AO to delete the addition of ?3,52,93,962/-.

The Tribunal upheld the CIT(A)'s decision, agreeing that the transaction did not constitute a "transfer" under the Income Tax Act, and the substantive addition had already been addressed in the buyer's case by the Settlement Commission. Therefore, the Tribunal dismissed the revenue's appeal on this ground.

Ground No. 2: Addition of ?4,00,000/- under Section 68 of the Act

During the assessment, the AO noticed an unsecured loan of ?4,00,000/- received by the assessee from Amritlal Chhaganlal Joshi. The assessee provided confirmation of the lender and bank passbook but did not submit the lender's return of income. The AO found the confirmation unsigned and the bank account details insufficient, leading to the addition of ?4,00,000/- as unexplained income under Section 68.

The CIT(A) admitted additional evidence during the appeal, including the lender's bank statement, confirmation, and documentary evidence of agricultural land ownership. The CIT(A) found the explanation plausible and noted the AO did not provide evidence to refute the claim. The CIT(A) concluded that the transaction was genuine and directed the AO to delete the addition.

The Tribunal agreed with the CIT(A), noting that the loan was received through normal banking channels, and the lender's agricultural background justified the absence of a return of income. The Tribunal found no merit in the revenue's appeal and dismissed it on this ground.

Ground Nos. 3 and 4: General Nature

The Tribunal dismissed these grounds, considering the findings on the main grounds of appeal.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on both the protective addition under Section 69A and the unexplained credit under Section 68. The order was pronounced in the open court on 12-04-2021.