Dineshbhai Dayabhai Hadiya Akshar Vs ITO (ITAT Rajkot)
Summary: The Rajkot Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal for assessment year 2008-09 and held that the reassessment could not stand because it was initiated solely on a direction made by the Commissioner of Income Tax (Appeals) while deciding an appeal for a different assessment year. The Tribunal directed deletion of the Rs.55,90,193 addition under section 69.
The dispute arose from the sale of an incomplete hotel building at Village Khicha, Taluka Dhari, on 6,100 square metres of converted land for Rs.60,00,000. The order records that the assessee had claimed Rs.58,34,000 in construction expenditure under an agreement dated 25.09.2007 with Shri Chaturbhai Bhimjibhai Vegad. The Assessing Officer doubted that agreement and the alleged later cash payments. An enquiry found that Shri Chaturbhai had died on 03.11.2000 and had worked as a small-scale mason rather than a civil contractor. The officer treated the claimed expenditure as unexplained under section 69C in the assessment for AY 2009-10.
In the AY 2009-10 appeal, the CIT(A) treated the agreement as a colourable device and deleted the section 69C addition for that year, reasoning that the construction investment belonged to financial year 2007-08 whereas the asserted source of payment was sale consideration received in financial year 2008-09. The CIT(A) also directed the Assessing Officer to assess Rs.55,90,193, the construction value in the valuation report, as unexplained investment under section 69 for AY 2008-09. The officer reopened that year’s assessment, made the addition after considering the record and directions under section 144A, and the subsequent appeal was dismissed.
