Case Law Details
Sunder Lal Vs ITO (ITAT Delhi)
Introduction: The cases of Sunder Lal vs. ITO (ITAT Delhi) for Assessment Years 2011-12 and 2012-13 revolve around issues concerning the deposit of sale consideration into a bank account. These cases highlight the challenges faced due to a lack of effective representation before the lower authorities and the subsequent direction by the Income Tax Appellate Tribunal (ITAT) for re-adjudication.
Assessment Year 2011-12: In the case related to Assessment Year (AY) 2011-12, the assessment was reopened under Section 147 of the Income-tax Act, 1961, and the assessment was framed under Section 144 r.w.s. 147. The reason for reopening was the deposit of cash into the assessee’s bank account. During the assessment process, the Assessing Officer (AO) sought an explanation from the assessee. However, no effective representation was made on behalf of the assessee. Consequently, the entire cash deposit and other receipts were treated as the assessee’s income. The assessee appealed this decision before the Commissioner of Income Tax (Appeals) or CIT(A), who upheld the addition due to the lack of an explanation.
In the appeal to the ITAT, the assessee contended that the deposit in the bank account was from the sale consideration of a piece of land and provided documents, including sale deeds and an affidavit, as evidence. The ITAT found that the CIT(A) had not adequately verified the correctness of the claim and that the assessee had not been given a fair opportunity to present their case. Therefore, the ITAT directed re-adjudication by the Assessing Officer with proper consideration of the evidence provided.
Assessment Year 2012-13: In the case related to AY 2012-13, the AO noticed that the assessee had not filed a return of income based on information about the transfer of a capital asset with a stamp duty value higher than the declared sale value. Consequently, the AO issued a notice under Section 148. The assessee filed the return of income but subsequently faced an addition of Rs. 8,36,000/- for the difference in property value and Rs. 42,854/- in undeclared salary income.
Before the ITAT, the assessee argued that the property’s value had been declared correctly, citing official circle rates from the Office of Sub-registrar, Jaipur. The ITAT observed that the AO’s finding required verification, and therefore, the assessment was set aside, directing the AO to re-examine the correctness of the claim regarding stamp value and, if necessary, delete the addition.
Conclusion: The cases of Sunder Lal vs. ITO underscore the importance of effective representation during assessment proceedings. In both cases, the ITAT recognized the need for thorough verification of claims and the inadequacy of previous assessments. Consequently, the ITAT directed re-adjudication to ensure fair and just decisions, emphasizing the taxpayer’s right to be heard and provide evidence in their favor. These cases also highlight the significance of accurate documentation and evidence to support claims before tax authorities.
FULL TEXT OF THE ORDER OF ITAT DELHI
These two appeals by the assessee pertaining to Assessment Years 2011-12 and 2012-13 are against two separate orders of the ld.CIT(A), National Faceless Appeal Centre, Delhi, dated 28.03.2023 and 27.03.2023.
2. First, we take up the appeal in ITA No.1593/Del/2023 pertaining to AY 201112. The assessee has raised the following grounds of appeal:-
“1. That on the facts and circumstances of the case, the order dated as 28.03.2023 passed by the Ld. Commissioner of Income Tax (Appeal) [hereinafter for the sake of brevity referred to as. “The Ld. CIT (A).’] under section 250 of the Income-tax Act, 1961 [hereinafter for the sake of brevity referred to as “The Act’] is bad at law and void ab initio.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in violating the principal of faceless appeal as announced for justice of honest taxpayers and the functioning of faceless processing’s in honesty and judicially manner and to avoid litigation as created unnecessary by AO.
3. That on the facts and in the circumstances of the case the Ld. CIT(A) grossly erred in sustaining addition of Rs 14,58,000/- in respect of unexplained cash deposit in bank and Rs. 1,27,046/- in respect of unexplained credit entries in bank.
4. That on the facts and in the circumstances of the case the Ld. CIT(A) grossly erred in representing erroneous and irrelevant finding in the order which are not born out from the assessment order, and thereby sustaining arbitrary addition in a hypothetical way by putting the assessee to erroneous harassment and inconvenience.
5. That on the facts and in the circumstances of the case the Ld. CIT(A) ought to have analyzing the submission, material and legal & valid evidences in right prospective and judicial manner.
6. That on the facts and in the circumstances of the case the Ld. C1T(A) grossly erred in sustaining addition made in income without having any credible evidence or only on the basis of assumption and presumption. ‘
7. All the above-mentioned grounds are independent and without prejudice to other.
8. That the appellant carves the right to add, alter, amend and delete the ground(s) of appeal during the course of hearing. ‘
3. The facts giving rise to the present appeal are that in this case, the assessment was reopened u/s 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) and the assessment was framed u/s 144 r.w.s. 147 of the Act, vide order dated 26.11.2018. The case was reopened on the ground that the assessee had deposited cash in the bank account. During the course of assessment proceedings, the AO sought explanation from the assessee, but, there was no representation on behalf of the assessee. Therefore, the entire amount deposited in the bank account and other receipts were treated as income of the assessee. Aggrieved against this, the assessee preferred appeal before the ld.CIT(A), who, after considering the submissions, sustained the addition on the ground that there was no explanation on behalf of the assessee.
4. Aggrieved, the assessee is in appeal before this Tribunal.
5. The ld. Counsel for the assessee reiterated the submissions as made in the statement of facts. He contended that the assessee was not provided adequate opportunity of hearing. He further submitted that the assessee had submitted before the ld.CIT(A) that father of the assessee had sold a piece of land and the amount deposited in the bank account was out of the sale consideration of the land. Further, father’s sister Smt. Janki also gave her share to the assessee. Therefore, he submitted that it is not the case where the assessee had not explained the source of cash. The assessee has filed an affidavit of Smt. Janki in this regard.
6. On the other hand, the ld. DR opposed the submissions and submitted that the assessee was provided adequate opportunity before the lower authorities, but, the assessee could not support his claim regarding source of cash deposits.
7. I have heard the rival contentions and perused the material available on record. I find that before the ld.CIT(A), the assessee had submitted that his father had sold a piece of land and the money in question was out of the sale consideration which was deposited in the bank account of the assessee. The assessee has also filed certain documents in the form of sale deed and affidavit by one Smt. Janki supporting the claim of the assessee. Looking to the totality of the facts and the material placed before me, I am of the considered view that the ld. CIT(A) ought to have verified the correctness of the claim of the assessee. Moreover, before the assessing authority, there was no effective representation on behalf of the assessee. I, therefore, set aside the impugned order and restore the assessment order to the file of the AO for framing the assessment afresh, after giving adequate opportunity to the assessee. The assessee would not seek any adjournment without any reasonable cause. The grounds raised by the assessee in this appeal are allowed for statistical purposes.
ITA No.1594/Del/2023 (AY: 2012-13)
8. The assessee has raised the following grounds of appeal:
“1. That on the facts and circumstances of the case, the order dated as 27.03.2023 passed by the Ld. Commissioner of Income Tax (Appeal) [hereinafter for the sake of brevity referred to as. “The Ld. CIT (A).’7 under section 250 of the Income-tax Act, 1961 [hereinafter for the sake of brevity referred to as “The Act’7 is bad at law and void ab initio.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in violating the principal of faceless appeal as announced for justice of honest taxpayers and the functioning of faceless processing’s in honesty and judicially manner and to avoid litigation as created unnecessary by AO.
3. That on the facts and in the circumstances of the case the Ld. CIT(A) grossly erred in sustaining addition of Rs 8,36,000/- in respect o f investment made out of his source of income not disclosed to the department and Rs.42,854/- in respect of salary income.
4. That on the facts and in the circumstances of the case the Ld. CIT(A) grossly erred in representing erroneous and irrelevant finding in the order which are not born out from the assessment order, and thereby sustaining arbitrary addition in a hypothetical way by putting the assessee to erroneous harassment and inconvenience.
5. That on the facts and in the circumstances of the case the Ld. CIT(A) ought to have analyzing the submission, material and legal & valid evidences in right prospective and judicial manner.
6. That on the facts and in the circumstances of the case the Ld. C1T(A) grossly erred in sustaining addition made in returned income without having any credible evidence or only on the basis of assumption and presumption. ”
7. All the above-mentioned grounds are independent and without prejudice to other.
8. That the appellant carves the right to add, alter, amend and delete the ground(s) of appeal during the course of hearing. ”
9. The facts relevant for the grounds raised are that the AO noticed that the assessee had not filed any return of income as per the information provided to the AO regarding transfer of capital asset where stamp duty value assessed was more than the declared sale value. Therefore, the AO issued a notice u/s 148 of the Act. In response to the notice, the assessee filed the return of income on 17.08.2019 declaring the total income of Rs.42,854/-. Thereafter, the AO proceeded to frame assessment u/s 143 r.w.s. 147 of the Act. Thereafter, he made an addition of Rs.8,36,000/- on account of the difference in value and a sum of Rs.42,854/- in respect of undeclared salary. Aggrieved against this, the assessee preferred an appeal before the ld.CIT(A), who partly allowed the appeal of the assessee sustaining an addition of Rs.8,36,000/-.
10. Aggrieved, the assessee is in appeal before this Tribunal.
11. The ld. Counsel reiterated the submissions as made in the written submissions. He contended that the residential property was purchased for a purchase consideration of Rs.3,50,000/- in the relevant assessment year. He submitted that the finding of facts arrived at by the lower authorities is erroneous and deserves to be set aside.
12. On the other hand, the ld. DR opposed the submissions and supported the orders of the authorities below.
13. I have heard the rival submissions and perused the material available on record. The AO, in para 3.1 of the order, has made the addition by observing as under:-
“3.1 The reply filed by the assessee has been considered carefully and it is devoid of any merit. The valuation of the property for registration purposes is a subject matter of the State Government undertaken by the Revenue Department of the respective area. The value of the property for said purpose is determined with regard to the location, development of the area and other surrounding circumstances as available at the time of making such assessment. The concerned authorities must have taken into consideration al l these factors before assessing the value for registration purposes. Moreover the assessee has purchased a piece of plot measuring 125 Sq.Yard in a city like Jaipur. The effective rate per Sqr.Yrd works out to Rs.9,488/- per Sq.yard which is most reasonable and justified in view of the prevailing market rates of the plots developed by housing societies in big cities like Jaipur . The contention of the assessee is thus not tenable and is rejected. The value o f the plot is adopted at Rs.11,86,000/- as against the purchase value declared at Rs.3,50,000/-. The assessee has thus made investment of Rs.8,36,000/-out of his sources of income not disclosed to the department. Therefore, an amount of Rs. 8,36,000/- is being added to the total income of the assessee as per the provisions of section 56(2)(vii)(b) of the I.T. Act, 1961. ”
14. This finding has been affirmed by the ld.CIT(A) and sustained the said addition on the ground that the addition is sustainable as per the provisions of section 56(2)(vii)(b) of the Act. It is the contention of the assessee that the official circle rate downloaded from the website of the Office of Sub-registrar, Jaipur, which states that in March, 2012, the stamp value as per the site was either Rs. 3,800/- sq. metre or Rs. 3,170/- per sq. mtr. The plot, i.e., the capital asset, as per the assessee was of 104.51 sq. mtr. Therefore, the AO was not correct and, moreover, there is no evidence to prove that any amount more than the sale consideration was paid to the vendor. Since the entire case of the Revenue is on the foundation that the declared value of the property in question was lower than the stamp value, this fact needs verification. Therefore, the assessment is set aside and the matter is restored to the AO for verifying the correctness of the claim of the assessee. If it is found that the stamp value is lower than that adopted earlier, the AO would delete the impugned addition. The grounds raised by the assessee in this appeal are allowed for statistical purposes.
15. In the result, the appeals of the assessee are allowed for statistical purposes only.
Order pronounced in the open court on 06.09.2023.
