Revenue Wrongly Treated Assessee’s Immovable Property Sale as Purchase: ITAT Deletes Addition, Criticises AO and CIT(A) [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has strongly criticised the Assessing Officer and Commissioner of Income Tax (Appeals) [CIT(A)] for erroneously treating an assessee’s sale of immovable property as if it were a purchase transaction. It deleted the addition of Rs. 40 lakhs.

Hamid Khan, the appellant-assessee filed appeal on the issue where the Assessing Officer (AO) misconstrued documentary records and brought to tax an amount by assuming that the assessee had purchased property, even though the material on record clearly showed that the assessee had sold it.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] not only confirmed the addition but also failed to properly appreciate the facts and evidence furnished by the assessee.

The Tribunal noted that such a mischaracterisation by both the AO and the CIT(A) revealed a lack of diligence in appreciating the basic nature of the transaction.

The bench stated that the tax liability cannot be fastened on imaginary or misconstrued grounds, and that authorities must carefully evaluate the evidentiary record before branding a genuine sale as a purchase.

It was stated that “The facts clearly reveal that the property was sold by the assessee which was purchased by him way back in 2005. Hence, it is not a case of unexplained investment at all. When these facts were confronted to the learned Senior DR, he has gone through the sale deed but could not controvert the above factual situation.”

The bench of Mahavir Singh (Vice President) deleted the addition in entirety. It further criticised the approach of the Revenue authorities, observing that mechanical confirmation of additions without fact-based analysis undermines the fairness of assessment proceedings.

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