2025 (7) TMI 754 - AT - Income Tax

Double addition with respect to purchase of property based on two annual information returns i.e. one on the basis of TDS made by assessee u/s 194IA and second on the basis of TDS return filed by the Sub registrar - addition was made of cash deposit in bank account received by assessee as a partner of firm which has made disclosure under IDS Scheme. HELD THAT - Assessee was given many opportunities before the ld. AO as well as the ld. CIT(A). However the assessee failed to respond to the many of such opportunities. Failure on the part of assessee for default despite service of proper notices has resulted into substantial addition in the hands of assessee. Had the assessee availed of the opportunities perhaps the assessment order and the appellate order would not have been passed without assessee being heard. There is no default on the part of the AO as well as the CIT(A) but it is the fault of the assessee who did not avail the opportunities granted to him. It is also true that if the contention of the assessee is accepted perhaps atleast the double addition on purchase of property would not survive but the same is a matter of examination. In view of the above facts and failure on the part of the assessee in availing of the opportunities granted we restore the whole matter back to the file of the ld. AO with a direction to the assessee to deposit a sum of Rs. 2, 000/- Rupees Two Thousand Only to the Prime Minister s National Relief Fund within 90 days from the date of this order as costs.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the Assessing Officer (AO) erred in making double additions in the hands of the assessee on account of purchase of immovable property, once based on the TDS statement under section 194IA of the Income-tax Act, 1961, and again on the basis of the Sub-Registrar's return, both relating to the same transaction;

(b) Whether the addition of cash deposits in the bank accounts of the assessee, purportedly unexplained and unaccounted for, was justified, particularly when the assessee claimed the source of such deposits to be income declared under the Income Declaration Scheme (IDS), 2016, by a partnership firm in which the assessee is a partner;

(c) Whether the assessee was afforded adequate opportunity of hearing before the lower authorities, especially the Commissioner of Income Tax (Appeals) [CIT(A)], and whether failure to respond to notices justifies dismissal of the appeal on merits;

(d) The procedural propriety of the assessment order passed under section 144 of the Act and the appellate order confirming the additions;

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Double Addition on Purchase of Immovable Property

Relevant legal framework and precedents: Section 194IA mandates deduction of tax at source on payment for transfer of immovable property other than agricultural land. The TDS returns filed by the deductor and the Sub-Registrar's records are independent sources of information for the Revenue. However, the principle that the same income should not be taxed twice is well-established in income tax jurisprudence.

Court's interpretation and reasoning: The Tribunal noted that the assessee had deducted tax at source on the purchase consideration of Rs. 124,05,708 under section 194IA. The Sub-Registrar's return also reported the same transaction valued at Rs. 145,09,600, which is the actual purchase price of the immovable property. The Tribunal accepted the assessee's contention that these two returns relate to the same single transaction of purchase of one residential flat at Pune.

Key evidence and findings: The assessee submitted the purchase deed and claimed that the TDS deduction and Sub-Registrar's return correspond to the same transaction. The AO, however, made separate additions based on both these returns, resulting in double addition.

Application of law to facts: The Tribunal held that the AO's approach of making additions on both the TDS statement and the Sub-Registrar's return for the same transaction amounts to double addition, which is not legally sustainable.

Treatment of competing arguments: The Revenue contended that the additions were justified based on independent information sources. The assessee argued that the same transaction cannot be taxed twice. The Tribunal favored the assessee's argument, subject to verification and opportunity of hearing.

Conclusions: The Tribunal concluded that the double addition on account of the single transaction of purchase of property is improper and should be examined afresh by the AO.

Issue (b): Addition of Cash Deposits in Bank Account Alleged to be Unexplained Income

Relevant legal framework and precedents: Cash deposits unexplained to the satisfaction of the AO can be treated as income under section 68 or other relevant provisions. The Income Declaration Scheme, 2016, allows declaration of undisclosed income with immunity, which can be a valid source for such deposits.

Court's interpretation and reasoning: The assessee claimed that the cash deposits in the bank accounts, including Rs. 13,05,000 in Corporation Bank and Rs. 117,29,000 in ICICI Bank, were sourced from the share of income declared by the partnership firm under IDS. The Tribunal found that the assessee failed to provide documentary evidence to the AO during assessment proceedings but argued that the source was explained.

Key evidence and findings: The assessee submitted bank statements and IDS declaration details post notices. The AO, however, proceeded with additions under section 144 due to lack of satisfactory explanation and non-cooperation by the assessee.

Application of law to facts: The Tribunal noted that the source of cash deposits being declared income under IDS is a valid explanation, but the assessee's failure to timely produce evidence led to adverse inference. The matter requires fresh examination with opportunity to the assessee.

Treatment of competing arguments: The Revenue emphasized the non-response to notices and absence of documentary proof during assessment. The assessee pleaded for opportunity to prove source. The Tribunal stressed the necessity of hearing and evidence before making final addition.

Conclusions: The Tribunal restored the issue to the AO for fresh adjudication after granting opportunity to the assessee to substantiate the source of cash deposits.

Issue (c): Adequacy of Opportunity of Hearing Before CIT(A) and AO

Relevant legal framework and precedents: Principles of natural justice require that the assessee be given adequate opportunity to present his case before adverse orders are passed. Failure to respond to notices may justify dismissal, but the assessee's claim of non-receipt or non-access to notices must be considered.

Court's interpretation and reasoning: The Tribunal observed that the CIT(A) issued five notices to the email address mentioned in Form 35, but the assessee did not respond. The assessee contended that the email ID belonged to his son and he could not locate the notices, effectively denying him hearing opportunity.

Key evidence and findings: The CIT(A) record showed service of notices; however, the assessee's assertion of non-receipt was not rebutted conclusively. The Tribunal recognized the procedural lapse on the part of the assessee in availing the opportunities.

Application of law to facts: The Tribunal held that the AO and CIT(A) cannot be faulted for the assessee's failure to respond. However, in the interest of justice, the matter should be remanded for fresh hearing and adjudication.

Treatment of competing arguments: The Revenue relied on the presumption of service and non-response to notices. The assessee sought opportunity to be heard. The Tribunal balanced these contentions by directing fresh opportunity subject to deposit of costs.

Conclusions: The Tribunal concluded that the assessee's failure to avail opportunities led to adverse orders but remanded the matter for fresh hearing to uphold principles of natural justice.

Issue (d): Procedural Validity of Assessment and Appellate Orders

Relevant legal framework and precedents: Assessment under section 144 is summary in nature and requires adherence to principles of natural justice. Appellate orders must be passed after hearing the assessee.

Court's interpretation and reasoning: The Tribunal found that the AO passed the order under section 144 after issuing multiple notices, but the assessee did not respond. The CIT(A) dismissed the appeal on merits and for non-response.

Key evidence and findings: The procedural steps taken by AO and CIT(A) were in accordance with law. The assessee's failure to respond was the cause of adverse orders.

Application of law to facts: The Tribunal held that procedural requirements were complied with and the fault lay with the assessee for non-cooperation.

Treatment of competing arguments: The assessee argued denial of opportunity; the Revenue supported procedural compliance. The Tribunal directed fresh hearing to cure any procedural infirmity.

Conclusions: The orders were procedurally valid, but remand was necessary to ensure fair hearing.

3. SIGNIFICANT HOLDINGS

"The claim of the assessee that there is only one transaction of purchase of immovable property reported in TDS return as well as the Sub Registrar's return is accepted. The addition on both the amounts reported in these two different returns concerning purchase of one property is a double addition and is improper."

"There is no default on the part of the Assessing Officer as well as the ld. CIT(A), but it is the fault of the assessee who did not avail the opportunities granted to him."

"In view of the above facts and failure on the part of the assessee in availing of the opportunities granted, we restore the whole matter back to the file of the ld. AO with a direction to the assessee to deposit a sum of Rs. 2,000/- to the Prime Minister's National Relief Fund within 90 days from the date of this order as costs and thereafter the assessee is required to submit details before the jurisdictional AO who has passed the order u/s. 144 of the Act. The ld. AO may examine the detail, grant opportunity of hearing to the assessee and then decide the issue on merits of the case."

Core principles established include the prohibition against double addition for the same transaction, the necessity of giving the assessee adequate opportunity of hearing before adverse orders, and the procedural correctness of assessment and appellate orders when proper notices are served but ignored by the assessee.

Final determinations on each issue are:

(i) The double addition on purchase of property is not sustainable and requires fresh examination;

(ii) The addition of cash deposits alleged as unexplained income is to be reconsidered after the assessee is given opportunity to substantiate the source;

(iii) The procedural lapses are attributable to the assessee's non-cooperation, but the matter is remanded for fresh hearing to uphold natural justice;

(iv) The appeal is partly allowed for statistical purposes with directions for fresh adjudication by the AO.