2022 (12) TMI 580 - AT - Income Tax

Reopening of assessment u/s 147- unexplained cash deposits - Assessee filed the return but had not disclosed the deposit of cash in the return of income - assessee took the plea that the said amount was accumulated for the sale of land, but the assessee was unable to produce any instrument related to proof of sale of land.HELD THAT - In the factual ground the grievance of the revenue that the acceptance of the instrument related to transfer of the property like agreement and power of attorney was in question. In the hearing before bench, the assessee also placed the registered power of attorney and the copy of the agreement as proof of the transaction. The revenue authority had not verified the purchaser of the property M/s R.K. Associates, Grain Market, Tanda, Distt., Hoshiarpur. In our opinion, the primary evidence, and party who paid the cash to the assessee for purchasing the land before the Bench, was unable to submit any registered deed related to transfer of property. As per the ld. Sr. DR, the total transfer of the land is incomplete without a registered deed of the property. But the ld. Counsel argued that the source of the cash was proved on basis of this transaction. In any case, we are set aside the issue to ld. AO for verification to the purchaser of the property M/s R.K. Associates. The issue should be disposed off accordingly with the above direction. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Assessment based on undisclosed income.
2. Validity of unregistered agreement as evidence.
3. Discrepancies in assessment by AO and CIT(A).
4. Challenge to addition made by AO.

Analysis:

Issue 1: Assessment based on undisclosed income
The appellant challenged the assessment order under section 250(6) of the Income Tax Act, 1961 for A.Y. 2011-12. The appellant contended that the assessing officer (AO) lacked valid reasons to believe that income had escaped assessment. The appellant further argued that the approval given by the Principal Commissioner of Income Tax (PCIT) was mechanical in nature and lacked verification. The revenue authorities ignored the unregistered agreement to sell as evidence of a contract, leading to discrepancies in the assessment. The appellant highlighted that the revenue authorities failed to consider all material facts, resulting in an incomplete assessment.

Issue 2: Validity of unregistered agreement as evidence
The appellant emphasized the importance of the unregistered agreement to sell as a valid piece of evidence, citing relevant case law. The appellant provided detailed calculations based on the agreement to demonstrate the sale value and the amount received. The appellant argued that the unregistered agreement should have been accepted as conclusive evidence, challenging the revenue's decision to disregard it. The appellant's submission focused on proving the legitimacy of the transaction through the agreement and registered power of attorney.

Issue 3: Discrepancies in assessment by AO and CIT(A)
The appellant raised concerns regarding the discrepancies in the assessment made by the AO and upheld by the Commissioner of Income Tax (Appeals) (CIT(A)). The appellant pointed out that the total consideration received was not accurately reflected in the assessment, leading to an unjust addition of income. The appellant highlighted the failure of the revenue authorities to verify crucial documents and information related to the transaction, resulting in an erroneous assessment.

Issue 4: Challenge to addition made by AO
The appellant challenged the addition made by the AO based on the deposit of cash in the bank account. The appellant argued that the amount deposited was accumulated for the sale of land and provided supporting documents such as a registered power of attorney and agreement. The revenue authorities questioned the genuineness of these instruments, leading to the addition of the deposited cash amount. The appellant contended that the failure to produce a registered deed related to the property transfer should not invalidate the transaction, as the primary evidence of the transaction was presented.

In conclusion, the ITAT allowed the appeal for statistical purposes, setting aside the issue for further verification by the AO regarding the purchaser of the property. The judgment highlighted the importance of thorough verification and consideration of all relevant evidence in making assessments to ensure fairness and accuracy in tax proceedings.