Assessment order based only on AIR report not sustainable
DCIT vs. Shree G. Selva Kumar (ITAT Bangalore), ITA No. 868/Bang/2009, Date- 22nd day of October, 2010
The assessee is an individual engaged in the business of real estate development, filed his return of income on 31.10.2006 for the A.Y. 2006-07 admitting an income of Rs.13,85,470. The case was taken up for scrutiny under CASS and notices were issued u/s. 143(2) and 142(1) of the Act. As per the AIR received by the Revenue, it was revealed that the assessee had purchased Immovable property located at No.488, 1st KIADB 14th Cross, Peenya, Bangalore – 560058 for a consideration of 70,00,000/-.
According to the ld. AO, the assessee had no answer with regard to the property purchased at Peenya for a consideration of Rs.70,00,000. Therefore relying on the AIR report, the ld. AO treated the property supposed to have been purchased by the assessee in Peenya as income from undisclosed investment and made an addition of Rs.76,30,000/- based on the purchase consideration of Rs.70,00,000/-, and assumption of, 8% towards stamp duty – Rs.5,60,000/-, registration fee at 1 % -Rs.70,000/-.
The assessee came in appeal before the ld. CIT(A). The CIT(A) after due deliberation and after obtaining a remand report of the ld. AO came to the following conclusion:
"From the above chart, it is seen that an amount of Rs.76,30,000 being investment in the property situated at Khata No.337, Nagashetty Halli Village, Kasaba Hobli, Bangalore North Taluk was made through Indian Bank Account of the appellant which is properly reflected in the books of accounts maintained and audited as per the provisions of the Income tax Act, 1961. As the appellant is a Builder and Developer, the cost of land purchased including the registration and stamp duty charges therein are reflected as cost of construction and as expenditure. As such, the investment made by the appellant for the purposes of residential complex has not been reflected under Fixed Assets in the financial statements. In this connection, the addition of Rs. 76,30,000/- without any evidence or material on record cannot be sustained and upheld. The A. O. has no cogent reason to disallow the said expenditure when the payment was made through appellant's bank account and the expenses are accounted in the books of accounts. In view of this, I am of the considered opinion that the disallowance made by the A. O. is not justified and the same has to be deleted. I, therefore, direct the A. O. to delete the addition accordingly."
AR forcefully submitted before us that the assessee had produced the books of accounts and relevant documents before the ld. CIT(A) to establish all the investments made by him. He further submitted that the assessee did not purchase any property in Peenya and therefore was not in a position to submit either the purchase details before the ld. AO or it found a place in the balance sheet of the assessee. Ld. AR prayed that the matter could be remitted back to the ld. AO for the AO to establish that the assessee has purchased the property in Peenya for Rs.70,00,000/- by producing the purchase deed. The assessment order based only on the reliance placed upon the information found in the AIR report is bad in law. The Revenue has to establish that the assessee had purchased the property by producing the sale deed from the Sub-Registrar, when the assessee claims that there was no such registration of sale executed by him. The document executed with the Sub-Registrar can be obtained by the Revenue in the event if it is not produced by the assessee. This is a case where the assessee denies for having executed any such sale deed. Therefore the onus is on the Revenue to establish that the assessee had made such investment.
DR vehemently supported the order of the ld. AO. She argued by stating that the AIR report can be relied upon by the Revenue, when the assessee has not co-operated by producing the relevant documents. Ld. DR contended that the AIR report had disclosed two properties purchased by the assessee. One of the purchases is established to be correct, and disclosed in the balance sheet of the assessee. Therefore, there was no reason for the AO to suspect that the information contained in the AIR pertaining to the other property purchased by the assessee to be incorrect. As a result, the AO was right in his realm to make the addition of Rs.76,30,000/- towards undisclosed investment based on the AIR information.
We have heard the rival submissions and minutely perused the records produced before us including the paperbook pages 1 to 20 submitted by the ld. AR. On the close perusal of the Ld.CIT(A)'s order it is observed that the appellant had explained that the Investment was notprojected as an Asset in the Balance sheet but was shown as the expenditure forming part of cost of construction of the project since the appellant is a builder. The ld. CIT(A) had also examined the payments met out of Indian Bank current account and verified the schedule of cash and bank balances.
The arguments put forth by the ld. AR and the Ld.DR, before us, are quit contrary to the facts observed by the ld.CIT(A) in his order. In these circumstances, we are of the opinion that the matter may be remitted back to the file of the ld.AO for de novo consideration with respect to the loan issue of purchase of property in Peenya. In the event the assessee claims that he has not purchased the property, as revealed in the AIR, before the ld.AO, then, it would be proper for the ld.AO to obtain the Sale Deed from the Sub Registrar's office to prove the revenue's claim. Assessment order based only on the AIR report will not stand in the eye of law. The assessee is also directed to co-operate with the proceedings by promptly producing the relevant documents and books of account required by the ld. AO.
PFA
Tribunal had taken the view that when the AIR shows some investment and the assessee denies it, no addition can be made on account of unexplained investments without further evidence to show that the assessee made investments.
RBNJ Naidu v. CIT 29 ITR 194 (Nag) It was held that when an assessee denies that he is in receipt of income from a particular source, it is for the ITO to prove that the assessee received income and that the assessee cannot prove the negative.
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