2023 (3) TMI 717 - AT - Income Tax

Unexplained investment in the purchase of property - HELD THAT - The assessee had purchased the piece of land measuring 18 kanal at Amritsar on 23.11.2006 for an amount of Rs.1,13,00,000/- and another piece of land measuring 16 kanal 1 marla at Amritsar on 05.12.2006 a sum of Rs. 50 lacs. The grievance of the AO was that the value was reduced during registration of the property. There is a huge difference in between agreement to sale and the registration of the property. The difference amount was taken as unexplained investment and added back the amount u/s 69 amount of Rs.3,40,00,000/-. After the agreement the dispute is occurred in acquisition of land and accordingly further bargain was taken place. The fact that the assessee clearly mentioned that this agreement was rejected, and the assessee further made a separate deal about the property and paid the value as decided during the registration. Copy of the ITR audited balance sheet as proof of payment is annexed - The issue was already dealt before the DCIT and the submission is annexed. We find that there is a reasonable explanation about the assessee for reduction of the value of the property as prior agreement to sale. We are not intervening in the order of the CIT(A). Accordingly, the appeal of the revenue is dismissed.

Summary

Issues involved:
The appeal is against the order of the ld. Commissioner of Income Tax (Appeals) for A.Y. 2007-08, emanating from the order of the ld. DCIT, Central Circle, Jammu, under sections 153A/143(3) of the Act.

Issue 1: Unexplained investment in property
The Assessing Officer made an addition of Rs. 3,40,00,000 under section 69 of the Act, based on documents found during a search operation indicating higher purchase prices than recorded in registered deeds. The appellant contended that original agreements were cancelled due to sellers' failure to obtain necessary permissions, leading to reduced purchase prices. The ld. CIT(A) dismissed the addition, and the revenue appealed.

Issue 2: Ignoring documentary evidence
The ld. CIT(A) was criticized for not discussing factors leading to cancellation of agreements and relying solely on terms of the agreements to presume higher sale consideration. The appellant provided affidavits confirming cancellation and refund of amounts, but the ld. AO added the unexplained investment based on the difference between agreement and registration prices.

Issue 3: Self-seeking additional evidence
The ld. CIT(A) relied on additional evidence produced by the assessee to counter the documentary evidence found during the search. The appellant argued that the cancellation of agreements and subsequent renegotiation at lower prices were valid reasons for the reduced values, supported by affidavits and audited balance sheets.

Decision:
The Tribunal found a reasonable explanation for the reduction in property values as prior agreements were cancelled due to the inability to obtain necessary permissions. The appeal of the revenue was dismissed, upholding the order of the ld. CIT(A).