The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition of unexplained investment of land is permissible in the absence of explanation by cash flow statement.
Shri S. Rama Rao, Advocate appeared for the assessee and Shri Solgy Jose T. Kottaram appeared for the revenue.
Shri Pujala Mahesh Babu, the assessee challenged the order of the learned CIT (A) in confirming the addition of Rs.25,87,000/- made by the Assessing Officer. The assessee is an individual and derives income as an agent of real estate activities. He filed his original return of income on 20.06.2012 declaring total income of Rs.4,29,940/-.
A search and seizure operation u/s 132 of the Income Tax Act was conducted in the Mansani group of cases on 20.11.2014 and the case of the assessee was also covered during which certain incriminating materials were seized. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 153A of the Income Tax Act,1961 on 29.12.2016 determining the total income at Rs.2,86,82,100/-. The CIT (A) on appeal, partly allowed the appeal filed by the assessee.
The Assessing Officer during the course of assessment proceedings noted that the assessee has purchased land situated at Indrakaran Village. Since the source of such investments as per the sale deeds was not explained, the Assessing Officer made an addition of the same to the total income of the assessee.
Counsel for the assessee submitted that the assessee in the return of income has offered capital gain of Rs.1,00,23,970/- and claimed the same as exempt. Further, the Assessing Officer noticed the receipts from various persons and therefore, he is not justified in making the addition on account of payments of Rs.25,87,000/-. The revenue, on the other hand, strongly relied on the order of the CIT (A).
It was observed by the ITAT that the addition was made being explained investment in lands at Indrakaran Village on the ground that the assessee was unable to explain the source of the above investments.
It was evident that the land was purchased during the year itself and the onus was on the assessee to explain the source of such investment. Merely stating that the assessee has sufficient funds will not absolve the assessee from his responsibilities especially when no cash flow statement was filed to explain the availability of funds and the assessee is also not maintaining any books of account.
While dismissing the appeal, the ITAT bench of Shri R.K. Panda, Accountant Member and Shri K. Narasimha Chary, Judicial Member upheld the order of CIT (A) which confirms the addition made by the Assessing Officer.
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