Imposition of Income tax Addition is not Justified when Additional Amount towards Purchase of Land is made by other Two Co-owners : ITAT Condones Delay of 1494 Days [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal held that the additional amount paid in cash on money was admittedly paid by the other two-owners and not by the assessee, thus the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] charging/making 20% addition of Rs. 1,77,000/- was not justified.

The assessee Manish Ramanbhai Patel filed its return of income was filed declaring total income of Rs. 3,10,110. The case was reopened under Section 147 of the Income Tax Act,1961 and notice under Section 148 of the Income Tax Act was issued. The AO observed that assessee along with other two co-owners had purchased land for Rs. 1,50,00,000/- as per registered sale deed.

The assessee made payment of Rs. 30,00,000/- by cheque out of total amount of Rs. 1,50,00,000/-, other two co-owners had made payment of Rs. 50,00,000/- by cheque and remaining payment of Rs. 70,00,000/- was made in cash.

The assessee submitted before the AO that during the search action under Section 132 of the Income Tax Act in the case of Baldevbhai Patel who is one of the co-owners of the said land property had admitted that the sale land had been purchased for Rs. 2,06,55,000/- and remaining payment of Rs. 56,50,000/- was made as on money.

The AO after taking cognizance of the reply of the assessee made addition of Rs. 41,78,333/- under Section 69 of the Income Tax Act as unexplained investment.

Aggrieved by the assessment order, the assessee filed appeal before the CIT(A), who partly allowed the appeal of the assessee.

At the time of hearing, none appeared on behalf of the assessee despite giving several notices which were duly received as per the acknowledgment card received by the registry. The contentions made by the assessee before the AO as well as CIT(A) are taken as contentions before the Tribunal.

There was a delay of 1494 days for which the assessee has filed condonation of delay application thereby stating that the assessee is not residing in India and in fact is a NRI and therefore was not aware to the order passed by the CIT (A).

The Departmental Representative (DR) submitted that CIT(A) has rightly upheld the addition to the 20% out of the total addition of Rs. 41,78,333/- and therefore the appeal needs to be dismissed.

The Single Member Bench comprising of Ms. Suchitra Kamble, Judicial Member noted that the search action against Mr. Baldevbhai Patel was not based for reopening of assessee’s case and assessee as well as co-owners i.e. Baldevbhai Patel and Saileshbhai Patel had admitted that the share of three purchasers was 60:20:20 respectively was there as  Baldevbhai Patel and Sailsesh bhai Patel and  Manish Ramanbhai Patel i.e. assessee.

It was further observed that the additional amount paid in cash on money was admittedly paid by the other two-owners and not by the assessee as per the reply filed by the assessee during the assessment proceedings.

The Tribunal observed that the assessee’s portion of share only 20% i.e. of 1,77,000/- and the CIT(A) has categorically observed that both co-owners has challenged the ratio of land holdings amongst co-owners who challenged addition of on money on the ground that money received earned on sale of land were utilized by said co-owners for making money payment of land.

The Bench held that since the explanation of the assessee was not taken into consideration by the AO as well as by the CIT(A), charging/making 20% addition of Rs. 1,77,000/- was not justified.

Therefore the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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