Addition made on Unexplained Investment u/s 69 of Income Tax Act without Proper Application of Mind: ITAT Deletes Addition [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT) deleted an addition made by the assessing officer on unexplained investment under section 69 of the Income Tax Act,1961 without the proper application of mind. 

Vijaykumar Kanaiyalal Matta, the appellant assessee was a non-resident and purchased a property in a project known as “Silver Arch” developed by Argent Constructions for a consideration of Rs.1 crore. The assessing officer made an addition on ground of unexplained investment in the bank account. 

Thus the assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the addition made by the assessing officer. 

Tejveer Singh, Manisha Rawat and Dharti Mehta, the counsels for the assessee contended that the assessee was a resident of Muscat and does not have any taxable income in India, therefore, does not file a return of income in India. The notice under section 148 of the Income Tax Act was issued to the assessee merely based on a statement recorded in search proceedings of a third party and the reasons recorded for reopening would show that the reasons are recorded without proper application of mind by the Assessing Officer (AO). 

It was also submitted that the assessment has been reopened merely based on information received from the Investigation Wing and the assessment had been reopened without any cogent material on record, hence, the reopening was bad in law. 

Abhishek Kumar Singh, the counsel for the revenue contended that the statement gave the details of the amount received from the assessee along with the dates and breakup of the amount received on each of the dates, and the opportunity of cross-examination was provided to the assessee failed to utilise and the assessee unable to prove that no money was paid by him. 

The bench observed that the provisions of section 69 of the Income Tax Act would get triggered if the investment was made from unaccounted money having a source in India and received or deemed to receive in India or accrue or arise or deemed to accrue or arise in India. Thus the source-based taxation the assessee being NRI would be eligible for treaty benefit in respect of his income earned in Muscat.  The two-member panel comprising Vikas Awasthy (Judicial) and Amarjit Singh ( Accountant) held that the addition made under section 69 of the Income Tax Act on account of unexplained investment was unsustainable and is liable to be deleted while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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