I-T - War against an Honest Assessee - HC Orders Enquiry
THE victim here sold a plot of agricultural land for Rs. 1.2 Crores but the registration was done only for Rs. 22 lakhs. (A very normal accepted practice). The assessee deposited an amount of Rs. 1.08 Crores in his bank account which he claimed as the sale consideration of the land sold by him. He claimed exemption of the agricultural land, which is not capital asset within the definition of Section 2 (14) (iii) (a) (b) of the Act and is therefore not chargeable for capital gains tax. He had also complained to the Stamp Valuation Authority that the transaction was undervalued.
The Income Tax Authorities were not prepared to believe such an honest assessee; so the AO added about Rs. 98 lakhs as income from undisclosed sources. However the ITAT deleted the addition, against which the Department appealed to the Allahabad High Court.
While dismissing the Revenue appeal, the High Court observed, " in the present case the Income Tax Officer did not act in bona fide manner. The assessee led substantial evidence to establish that the amount treated to be undisclosed income by the A.O. was the sale consideration of sale of his agricultural land, which he had deposited in the bank and had voluntarily filed return disclosing his income. Overwhelming evidence led by him was discarded without giving any reasons at all. The assessment was framed only on the ipse dixit of the A.O., which gives us reason to believe that he had exceeded his authority with some ill will or with ulterior motive."
The Court directed the CBDT Chairman to cause an enquiry into the conduct and motives of Income Tax Officer, Ward-1, Hapur in framing the assessment and raising demand of income tax against the petitioner.