Pr. Commissioner of Income Tax-21 vs Om Prakash Aggarwal

This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (''Act'') is directed against the impugned judgment dated 30th September 2014 passed by the Income Tax Appellate Tribunal (''ITAT'') in ITA No. 2603/D/2013 pertaining to the Assessment Year (''AY'') 2008-09.

The background facts are that on 28th August 2008 a search and seizure operation under Section 132 of the Act was carried out in the case of Swastik Pipes groups of cases. Pursuant to the notice under Section 153A of the Act, the Assessee filed his income return declaring income of Rs. 16,00,780 on 2nd July 2010. The Assessing Officer (''AO'') completed assessment by making certain additions at the total income of Rs. 1,60,75,308 as against the returned income of the Assessee. Two additions were made by the AO, one being the sum of Rs. 37,80,000 and another the sum of Rs. 50 lakhs, on the basis that they were undisclosed amounts paid by the Assessee towards purchase of property. Both additions were made on the basis of slips recovered during the search.

The Assessee''s appeal was partly allowed by the Commissioner of Income Tax (Appeals) [''CIT (A) ''] by an order dated 22nd February 2013. The CIT (A) noted the explanation offered by the Assessee that had made total payment of Rs. 40,12,501/- till 31.03.208, to acquire the right to own unit No. 504. in Pearl Business Park at Netaji Subhash Place. As regards the loose sheets recovered during the search, the Assessee explained to the AO in a letter dated 16th September 2010 that they were the photocopies of the diary of one of the property brokers whom the Assessee had come into contact with while looking for a unit. The said broker had given a lot of proposals to the Assessee which were noted in his diary with the surname of the Assessee and his mobile number. The photocopies of those pages had been given by the broker to the Assessee. However, the AO proceeded on the basis that the booking rate of the property admeasuring 540 sq.ft was Rs. 13,000/- of which Rs. 6,000 per sq. ft. was mentioned as the "white" component. Thus, an the amount of Rs. 7,000/- per sq. feet for 540 sq. feet which had to be paid ''out of the books'' worked out to Rs. Rs. 37,80,000 and was added to the taxable income of the Assessee. The Assessee explained that he had in fact made full and final payment towards the said unit No. 504 to the Builder on 2nd January 2013 in the aggregate sum of Rs. 78,75,268/- (Rs. 71,52,693/- plus Rs. 7,22,575/- being the allied charges). The CIT (A) was of the view that once the Assessee had given an explanation for the entries in the loose sheets, the onus shifted to the Revenue. The CIT (A) held that it was incumbent on the Revenue to cause enquiry and establish the claim of the Assessee to be false. The CIT (A) felt that verification of the properties could have established the truth of the matter. Since the AO failed to do so, the addition was deleted.

As regards the addition of Rs. 50 lakhs, the Assessee had pointed out that he had not even gone ahead with the purchase of the second property of 957 sq.ft. for which only a proposal had been put forward by the broker in the loose sheets. The Assessee contended that the AO had proceeded purely on surmises and conjectures to infer that the Assessee had paid Rs. 50 lakhs and added the said sum to his income. Again, the CIT (A) held that once the Assess had offered an explanation, the AO ought to have conducted an inquiry and undertaken verification of the properties. In the absence of any evidence the addition was held to be unsustainable and ordered to be deleted.

In its impugned order in the appeal by the Revenue, the ITAT held that as far as the addition of Rs. 37,80,000 was concerned, since the Assessee had admitted to having paid for the property at Rs. 13,000 per sq.ft but not out of the books, it was "just and proper to restore the issue to the file of AO with a direction that the AO shall afford an opportunity of hearing for the Assessee and the Assessee shall explain the detail of the investment before the AO substantiating the fact that the Assessee had actually paid purchase consideration @ 13000 per sq ft. for the property of 540 sq.ft." As regards the addition of Rs. 50 lakhs the ITAT found no perversity in the order of the CIT (A).

Ms. Suruchi Aggarwal, learned Senior standing counsel for the Appellant was unable to point out why the direction of the ITAT remanding the matter of addition of Rs. 37,80,000 to the AO for affording an opportunity to the Assessee to explain the details should be interfered with. She urged that even in respect of the addition of Rs. 50 lakhs a similar direction ought to have been issued.

The Court is unable to agree. The second addition of Rs. 50 lakhs stood on a different footing. As is evident from the concurrent orders of the CIT (A) and the ITAT, the said addition was indeed made by the AO purely on surmises without any inquiry whatsoever. The said addition was rightly directed to be deleted.

No substantial question of law arises for determination.

The appeal is dismissed.