Case Law Details
DCIT Vs Vinay Chandra (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) has ruled in favor of the taxpayer in the case of DCIT vs. Vinay Chandra, effectively dismissing the revenue’s appeal concerning an addition made under Section 69A of the Income Tax Act. The tribunal’s decision highlights the importance of adhering to due process and the necessity for revenue authorities to substantiate any claims regarding undisclosed income.
Background of the Case
The appeal was directed against the order issued by the Commissioner of Income Tax (Appeals) [CIT(A)] via the National Faceless Appeal Centre (NFAC), dated March 8, 2024. This case pertains to the assessment year 2017-18, stemming from an assessment order dated December 16, 2019, completed under Section 143(3) of the Income Tax Act, 1961.
The taxpayer, an individual with income derived from house property, long-term capital gains, and other sources, filed a return showing an income of ₹25,03,760. This return included a deduction of ₹3,21,177 under Chapter VI-A. Following the selection of the case for limited scrutiny through the Computer Aided Scrutiny Selection (CASS) system, the Assessing Officer (AO) issued a notice under Section 143(2) on August 13, 2021. After reviewing the case, the AO completed the assessment and made an addition of ₹2,90,00,000, categorizing it as unexplained income from undisclosed sources under Section 69A.
Findings of the CIT(A)
Dissatisfied with the AO’s addition, the taxpayer filed an appeal with the CIT(A). The CIT(A) conducted a detailed examination of the case and noted several important points. He emphasized that the AO had accepted both the sale of the property and the subsequent purchase of a new property, as evidenced by the relevant property deeds submitted by the taxpayer.
The CIT(A) articulated his reasoning clearly, stating, “In view of above submission, considering the entire conspectus of the case, I find merit in the contention of the appellant in as much as the AO has accepted the sale of property and subsequently the purchase of property made by the appellant as per the deeds of properties furnished by the appellant. Therefore, I find infirmity in the order of AO in as much as the AO is unable to establish the addition made by the appellant from its undisclosed source.”
Consequently, the CIT(A) deemed the addition of ₹2,90,00,000 not made in accordance with the law and ordered its deletion.
Proceedings in ITAT
The revenue, aggrieved by the CIT(A)’s order, appealed to the ITAT, seeking a reversal of the decision. The principal argument put forth by the learned Departmental Representative (DR) pertained to the CIT(A)’s deletion of the addition under Section 69A, which had been categorized as unexplained income from undisclosed sources. The appeal primarily focused on the substantial increase in capital noted in the taxpayer’s records.
In the proceedings, the ITAT reviewed the CIT(A)’s findings and the AO’s remand report. The remand report indicated that the taxpayer had provided a sale deed for the purchase of a new property dated July 25, 2017, with payments made between July 1, 2017, and July 14, 2017, during the financial year 2017-18. The taxpayer had disclosed this income in his return, and the AO had previously accepted the sale of the property along with the purchase of the new one.
After thoroughly analyzing the evidence presented, the ITAT concluded that the CIT(A) had acted correctly in deleting the addition made by the AO. The tribunal found no grounds to interfere with the CIT(A)’s conclusions and dismissed the revenue’s appeal.
Conclusion
The ITAT’s ruling in DCIT vs. Vinay Chandra underscores the necessity for the tax authorities to substantiate claims of undisclosed income with concrete evidence. In this case, the acceptance of the property sale and subsequent purchase played a crucial role in the decision to annul the addition under Section 69A.
This outcome reinforces the principle that tax assessments should be grounded in solid factual foundations and highlights the procedural safeguards available to taxpayers when faced with unfounded claims by the revenue authorities. As a result, the decision serves as an important reference for similar cases involving disputed assessments and the requirements for demonstrating undisclosed income. The appeal of the revenue was thus dismissed, concluding the matter as pronounced in open court on August 8, 2024.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the revenue is directed against the order of the CIT(Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “NFAC”] vide order dated 08.03.2024 pertaining to A.Y. 2017-18 and arises out of the assessment order dated 16.12.2019 under section 143(3) of the Income Tax Act 1961 [hereinafter referred as ‘the Act’]
2. The brief facts of the case are that the assessee is an individual having source of income from House Property, Income from Long term capital gain and Income from other The assessee has filed his return of income of Rs 25,03,760/-after claiming deduction of Rs.3,2 1,177/-under chapter VI-A. The case was selected through CASS for Limited scrutiny and the AO has issued a notice under section 143(2) dated 13.08.2021 which was duly complied by the assessee. The AO has completed the assessment u/s. 143(3) by making addition of Rs.2,90,00,000/-. The assessee has filed the appeal before the Ld CIT(A) which was allowed vide order dated 08-03-2024. Aggrieved the order of Ld CIT(A) the revenue in appeal before us.
3. The Ld. CIT(A) has observed as under :-
“In view of above submission, considering the entire conspectus of the case I find merit in the contention of the appellant in as much as the AO has accepted the sale of property and subsequently the purchase of property made by the appellant as per the deeds of properties furnished by the appellant. Therefore, I find infirmity in the order of AO in as much as the AO is unable to establish the addition made by the appellant from its undisclosed source. Accordingly the addition made by the AO of Rs.2,90,00,000/- is not made in accordance with law and deserved to be deleted.”
4. We have heard the Ld. DR and none appeared on behalf of the assessee. The substantive grievance argued before us relates to the deletion of Rs.2,90,00,000/-by CIT(A), which was treated as unexplained from undisclosed sources u/s. 69A of the Act and other CASS selection reason was large increase of capital.
5. On perusal of the order of the Ld CIT(A) it reveals that the remand report was called out by the Ld CIT(A) in which the AO has stated that the assessee has filed the sale deed of the purchase of new property on 25-07-2017 and payment has been made from 01-07-2017 to 14-07-2017 i.e. during the F.Y.2017-18. The assessee has disclosed the income in the return of income and AO has accepted the sale of property and subsequently the purchase of new property. The Ld CIT(A) has rightly deleted the addition made by the AO and there is no reason to interfere with the findings of the Ld CIT(A). The appeal of the revenue is liable to be dismissed.
6. In the result, the appeal of the revenue is dismissed.
7. The order pronounced in the open court on 08.08.2024 .
