Case Law Details
Karim Tajdin Halani Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad, in Karim Tajdin Halani vs. ITO, deleted an Rs. 18 lakh addition made by the Assessing Officer (AO) on the grounds of unexplained investment. The case pertained to the assessment year 2016-17, where the assessee’s return was selected for scrutiny under CASS to verify cash deposits and property transactions. The AO added Rs. 18 lakh as undisclosed investment, arguing that the amount was not explained. The CIT(A) upheld the addition, prompting the assessee to appeal before ITAT.
The assessee contended that while he had purchased the property for Rs. 43 lakh, Rs. 25 lakh was financed through a bank loan, and the remaining Rs. 18 lakh was not yet paid due to a dispute with the seller. The Tribunal noted that while the assessee claimed a dispute, no supporting legal evidence was presented. However, it observed that mere suspicion or assumption of payment could not justify an addition, especially in the absence of concrete evidence linking the amount to undisclosed income.
Relying on CIT vs. Star Builders (IT Ref. No.9 of 1999, Gujarat High Court), the Tribunal reiterated that suspicion alone cannot be grounds for addition. It emphasized that the AO failed to demonstrate that the assessee had indeed made the payment or that the amount came from undisclosed sources. The Tribunal also found inconsistencies in the AO’s approach, as there was no direct evidence of the alleged payment in the assessee’s bank statements or financial records.
Considering these factors, ITAT Ahmedabad ruled in favor of the assessee and deleted the Rs. 18 lakh addition. The decision underscores the principle that tax authorities must base their assessments on substantive evidence rather than presumptions. The appeal was accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against order dated 27.02.2024 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2016-17.
2. The assessee has raised the following ground of appeal :-
“1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.18,00,000/- being an investment in property made out of undisclosed sources despite the fact that the said amount is yet to be paid by the appellant due to dispute with the sealer of the property.”
3. The assessee is an individual and filed return of income for the Assessment Year 2016-17 on 21.06.2017 declaring total income at Rs.11,47,230/-. The case of the assessee was selected for limited scrutiny through CASS to verify the issue of cash deposits in bank and transactions in property. The assessee was served show cause notice dated 14.11.2018 which was responded by the assessee thereby explaining that the assessee has purchased property at Survey No.339/2+3, sub plot No.C/26, At-Vaghasi for Rs.43,00,000/-. The assessee has discharged consideration of Rs.25,00,000/- by obtaining loan from DCB Bank. As regards balance consideration of Rs.18,00,000/-, the same was not paid due to the dispute with the seller. These facts were submitted before the Assessing Officer and after taking into account the Assessing Officer made addition of Rs.18,00,000/- as investment in property made out of undisclosed sources. The Assessing Officer also made addition of Rs.11,00,000/-towards cash deposited in Karur Vaisya Bank Limited treating the same as unexplained cash.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. AR submitted that the CIT(A) was not justified in confirming the addition of Rs.18,00,000/- being investment in property made out of undisclosed sources despite the fact that the said amount was not paid by the assessee due to the dispute with the seller of the assessee. The Ld. AR further submitted that there is a delay of 21 days in filing the present appeal, as the assessee, due to personal circumstances, could not file the appeal within the time.
6. The Ld. DR submitted that the assessee is enjoying the possession but has not paid the amount as per the submission is not tenable as the assessee could not establish that there was a dispute between the parties.
7. Heard both the parties and perused all the relevant material available on record. The assessee purchased immovable property of Rs.43,00,000/- and in fact taken a home loan of Rs.25,00,000/- and balance payment of Rs.18,00,000/- was paid in subsequent year but the details of remaining Rs.18,00,000/- was not supported by any evidence as mentioned by the CIT(A). Before the Tribunal, the assessee submitted that the there was a dispute but the assessee has not demonstrated that any legal action in respect of the dispute with the seller was taken or not. Besides this, the assessee is enjoying the possession of the property which shows that the assessee, as per the documents, must have paid the amount of Rs.18,00,000/-. Even for the time being it is taken into account that the assessee has paid fully but the reflection of the payment in his details of Bank account is not demonstrated or properly linked by the Assessing Officer and merely estimation cannot be termed as unexplained investment from undisclosed sources. The decision of the Hon’ble Gujarat High Court in the case of CIT vs Star Builders (IT Ref. No.9 of 1999, order dated 13.11.2006) merely mentioned that the mere suspicion cannot be ground for making addition. Therefore, in the present case, the Assessing Officer as well as the CIT(A) has only presumed that there was payment of Rs.18,00,000/- which is not reflected in any of the accounts or demonstrated by the Assessing Officer that the assessee made only payment of Rs.18,00,000/-. Thus, appeal of the assessee is allowed
8. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open Court on this 27th December, 2024.
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