Validity of Addition to Income if Assessee failed to explain source of investment in purchase of property

• Short Overview : Where assessee failed to explain source of investment in alleged property, the AO was justified in concluding that the said investment was made out of undisclosed source and accordingly, the addition made by him under section 68 was liable to be upheld.
• AO found that assessee had made large investment in property as compared to her total income and thus, she was asked to explain the source of investment. Assessee submitted that her maternal uncle made a gift to purchase the said property. When AO asked the assessee to prove the identity of her maternal uncle and his creditworthiness and genuineness of the transaction, assessee failed to prove anything despite giving several notices. Accordingly, AO concluded that assessee made investment in the property out of undisclosed sources and accordingly, made the addition under section 68. Further, CIT(A) confirmed the said addition.
• it is held that It was found that assessee made a contradictory explanation before CIT (A) and it was submitted for the first time that, the alleged property belonged to her father, who gave General Power of Attorney (GPA) of such property to her mother. She further, submitted that her mother executed the sale deed in her favour. CIT(A) on examination of the GPA found that mother of the assessee was holding GPA for several properties and was authorized to execute the sale deed. There is no bar on GPA holder to execute sale deed in law when he is authorised to execute sale deed. Even before the Tribunal, assessee failed to explain the source of the investment in alleged property. Hence, the addition made under section 68 was upheld.
• Decision: Against the assessee.
• IN THE ITAT, DELHI BENCH
• BHAVNESH SAINI, J.M. & PRASHANT MAHARISHI, A.M.
• Nikunj Malik v. ITO
• ITA. No. 542/Del/2018
• 4 September, 2018
• Assessee by: Jitender Wadhwa, C.A.
• Revenue by: Vijay Kumar Jiwani, Sr. Departmental Representative.

• ORDER

• Bhavnesh Saini, J.M.
• This appeal by Assessee has been directed against the Order of the learned Commissioner (Appeals), Faridabad, Dated 28-11-2017, for the assessment year 2014-2015, challenging the addition of Rs. 44,05,000 on account of investment in purchase of property.
• 2. Briefly the facts of the case are that assessee filed return of income of Rs. 3,18,450. The assessee is not maintaining any books of account. The case of the assessee was selected for scrutiny on the reason that as per AIR information large investment is made in property as compared to the total income. Sale consideration of property in ITR is less than the sale consideration of property AIR. The assessee was asked to explain the source of investment made in purchase of property. The assessee filed copy of the Purchase Deed relating to agricultural land in Village Kudana, Shamli for Rs. 42 lakhs. The assessee was asked to explain the source of the investment with documentary evidence. The assessing officer has given various opportunities to the assessee but no satisfactory reply have been filed. The assessee in the reply submitted that her maternal uncle who made a gift to purchase property at Shamli had expired and sought one month time to file documentary evidences.
• 2.1. The assessing officer thereafter, gave several notices to the assessee to explain the source of the investment in the property and to explain the gift made by maternal uncle. However, again no satisfactory explanation have been filed. Thereafter, mother of the assessee appeared on behalf of the assessee before assessing officer but again no satisfactory explanation have been filed. Ultimately, no explanation regarding source of investment in purchase of the above property was made either by the assessee or by her mother. The assessing officer thereafter again issued statutory notices seeking explanation of assessee. The assessee, ultimately, reiterated that her maternal uncle who made gift to purchase property at Shamli had expired. The assessing officer asked the assessee to prove the nature of the transaction along with identity, creditworthiness and genuineness of the transaction of the donor i.e., maternal uncle. But, assessee did not lead any evidence to explain the same. The assessing officer in the absence of any explanation, did not consider the explanation of assessee about the gift of the property and held that assessee has made investment in the property out of undisclosed source and accordingly, made the addition of Rs. 44,05,000.
• 3. This addition was challenged before the learned Commissioner (Appeals). The assessee also filed additional evidences which are affidavit of the seller and buyer (assessee). The assessee in the explanation before learned Commissioner (Appeals), reiterated the same fact and further that in the family of the assessee, her parents are different set of mind. Mother of the assessee supports the ideas/acts of the assessee, however, father did not do so. The subject agricultural land was the inherited property of the father of the assessee and due to family understanding the GPA for the said agricultural land was executed in past by the father of the assessee in favour of her mother. Finally, after denial by the father to support his daughter (i.e., assessee) in acquisition of the Flat at Mumbai, mother executed the sale deed in favour of assessee, so that, she become capable to sold the said agricultural land and purchase her house at her desirable place. The consideration of Rs. 42 lakhs was mentioned in the said sale deed for the purpose of payment of stamp duty on the said transaction, as there was no actual consideration paid or received by the assessee and her mother/father. It was submitted that mother was the GPA holder. Mother has actually gifted the property to the assessee, but, due to some legal conditions the title will be transferred by way of sale deed only. Therefore, sale deed was executed by the mother of the assessee in favour of assessee. The learned Commissioner (Appeals) called for the comments of the assessing officer on the additional evidences. The report of the assessing officer is reproduced in the appellate order in which the assessing officer reported that assessee has made contradictory statements. In order to verify the contents of affidavit of the assessee that no consideration was paid, enquiry letter under section 133(6) of the Income Tax Act, 1961 was issued to Sub-Registrar, Shamli who has reported that if there is any Gift of immovable property, then, Registration of Property would have been done under section 18(33) of the Indian Stamp Act, 1899. It is also reported that in this case registration of immovable property have been done under section 18(23) for a consideration of Rs. 42,90,000 and in the registration deed, it has been accepted by seller that amount of Rs. 42,90,000 have been received by her in cash. The assessing officer, thus, reported that claim of assessee is incorrect and till date no copy of the gift deed have been furnished before assessing officer The assessing officer also reported that in the GPA it is no where mentioned that GPA holder could execute the gift deed of the property in question. The assessee filed counter comments reiterating the same facts. The learned Commissioner (Appeals) considering the explanation of assessee and assessing officer, material on record, confirmed the addition and dismissed the appeal of assessee. His findings in para-13 of the order are reproduced as under :–
• 13. “I have carefully considered the facts of the case and gone through the sub-missions filed by the counsel of the appellant during appellate proceedings together with the Remand Report of the assessing officer. The mother of the appellant, Smt. Subhlaata Malik, was holding General Power of Attorney with regard to the property in issue and several other properties owned by the appellant’s father. Ongoing through the GPA, it is seen that with respect to the properties mentioned, the holder is authorized to execute the sale deed/conveyance deed/lease deeds, to present the same for registration, to admit the execution, to receive the sale consideration etc. However, it is worthwhile to note that nowhere in the GPA, holder of the GPA is allowed to Gift the property to anybody. Therefore, it can be safely acknowledged that transfer of property could not have been made by way of gift i.e. without accepting any consideration. Also, what is written in the registration deed cannot be ignored. In the registration deed, it has been clearly stated that consideration of Rs. 42,00,000 has been received in cash by the seller. Thus, in the absence of any explanation of source of Rs. 44,05,000 and gift deed to prove that the transaction between mother and daughter was not a sale transaction but a gift transaction, I find the additions for Rs. 42,00,000 and Rs. 2,05,000 (on account of payment of stamp duty from undisclosed sources) has been rightly made by the assessing officer. The contradictions in the stand taken by the appellant before the assessing officer and during the appellate proceedings also weakens the case of the appellant considerably (refer to the remand report of the assessing officer as reproduced earlier in this order). Therefore, this ground of the appellant is dismissed and the addition made by the assessing officer is confirmed.”
• 4. We have heard the learned Representatives of both the parties and perused the material available on record. Learned Counsel for the assessee reiterated the same facts and submitted that mother of the assessee was GPA holder and could not have executed the sale deed for consideration. It was not a real transaction but only a gift executed in favour of the assessee. He has, therefore, submitted that addition may be deleted.
• 5. On the other hand, learned Departmental Representative relied upon the orders of the authorities below.
• 6. We have heard rival submissions and do not find any justification to interfere in the Orders of the authorities below. The assessee claimed before assessing officer that maternal uncle of the assessee made a gift to purchase the property. When the assessing officer asked the assessee to prove the identity of her maternal uncle and his creditworthiness and genuineness of the transaction, assessee failed to prove anything despite giving several notices. The assessee did not file any evidence regarding source of investment in the property. The assessee, however, made a contradictory explanation before learned Commissioner (Appeals) and it was claimed for the first time that in fact, it was a property of the father of the assessee who has given GPA to mother of the assessee, who has executed the sale deed in favour of the assessee. Learned Counsel for the assessee contended that since mother of the assessee was GPA holder, therefore, no sale deed could have been executed for consideration. The contention of Learned Counsel for the assessee has no merit and is liable to be rejected. The Income Tax Department is concerned with the source of the investment in purchase of property at the end of the assessee. There is nothing wrong for the Income Tax Department to seek explanation of assessee regarding source of investment in property. The assessing officer in the remand report also reported that GPA holder was not allowed to make a gift. However, there were no bar in the GPA to execute the sale deed in favour of the assessee. The assessee did not deny execution of the sale deed, copy of which is filed at page-4 of paper book, in which mother of the assessee has been shown as seller and assessee as purchaser and for a consideration of Rs. 42 lakhs the property was sold to the assessee. The seller has acknowledged the receipt of cash of Rs. 42 lakhs in the sale deed. Further amount was spent on stamp duty etc., for execution of the sale deed. The sale deed is produced on record by the assessee and is a document belong to her. The assessee cannot deny the genuineness of the registered document at this stage. Further, the assessee did not produce any evidence on record to resile from the registered document. It is well settled law that contents of the registered document cannot be disputed through oral evidence. On the face of the registered sale deed, it is established that assessee made an investment in cash in purchase of property for a sum of Rs. 42 lakhs and other amount was spent for stamp duty etc. The assessee is, therefore, under an obligation to explain the source of investment in the above property. The assessee instead of explaining the source of investment in property, came up with another explanation that it was the property of her father which was given on GPA to her mother who has executed the sale deed in favour of the assessee which was in fact a gift deed. The explanation of assessee is rebutted by the assessing officer in the remand report because the Sub-Registrar who has registered sale deed in question has reported that in case of gift of immovable property, the property should have been registered under a different head. The property in question is registered as sale deed for a cash consideration of Rs. 42,90,000. Thus, the claim of assessee cannot be accepted and appears to be an afterthought. The assessee did not produce any evidence on record in support of any of the contradictory explanation made before assessing officer or before learned Commissioner (Appeals). The learned Commissioner (Appeals) on examination of the GPA found that mother of the assessee was holding GPA for several properties and was authorized to execute the sale deed. There is no bar on GPA Holder to execute sale deed in Law when he is authorised to execute sale deed. Therefore, there is no infirmity in the orders of the authorities below in making and confirming the addition. Even before the Tribunal, assessee failed to explain the source of the investment in the above property. Therefore, assessee miserably failed to substantiate any of her explanation through any evidence or material on record. The appeal of assessee has no merit and the same is accordingly dismissed.

7. In the result, appeal of assessee is dismissed.