The Delhi Bench of Income Tax Appellate Tribunal(ITAT) directed the Assessing Officer (AO) to delete the addition of Rs. 41.47 lakh for unexplained property investment after verifying the source of funds.
Gajendra Pal Sharma,appellant-assessee,filed a return of income on July 25, 2012, declaring Rs. 2,34,600 as total income and Rs. 49,500 as agricultural income.AIR information from the sub-registrar revealed that he purchased a residential property in Ghaziabad for Rs. 90,95,000, including stamp duty, on February 16, 2012, jointly with Meena Sharma.
The AO issued a notice under Section 133(6) to verify the transaction, but there was no response. A notice under Section 148 was then issued on March 29, 2019, with approval from the Principal Commissioner of Income Tax(PCIT), Ghaziabad.
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During assessment, the AO was not satisfied with the explanation and added Rs. 70,95,000 under Section 69 of the Act. On appeal, the Commissioner of Income Tax(Appeals)[CIT(A)] reduced the addition to Rs. 41,47,382.
The assessee appealed before the tribunal.
The assessee’s counsel explained that the assessee and his wife, Mrs. Meena Sharma, bought a property for Rs. 90,95,000 on 16.02.2012. To fund the purchase, the assessee took a housing loan of Rs. 20,00,000 and used Rs. 7,84,000 from the sale of land, Rs. 11,00,000 from the sale of a house, and Rs. 18,55,000 in unsecured loans from his wife’s friends and relatives. They also used Rs. 4,99,881 from selling jewellery and Rs. 8,00,000 in cash, along with savings of Rs. 19,58,197.
The counsel said the AO wrongly treated the whole property purchase as unexplained investment in the assessee’s name, even though it was jointly owned. The counsel also mentioned that all relevant documents, including details of the unsecured loans, were submitted.
The CIT(A) did not address the unsecured loans, and the AO overlooked two cheques for Rs. 11,00,000 given in March 2012, which were cleared in June 2012.
The counsel concluded that the actual investment was Rs. 45,47,500, and the source of funds was proven. The counsel requested the deletion of the addition of Rs. 41,47,382.
Read More: Lack of Evidence in proving Unexplained Investment u/s 69 of IT Act: ITAT deletes Addition
The two member bench comprising Challa Nagendra Prasad (Judicial Member) and Naveen Chandra(Accountant Member) reviewed the relevant material and found that the residential property was purchased on 16.02.2012 for Rs. 90,95,000 in joint names with the assessee and his wife. The assessee was required to explain the source of 50% of the investment.
The assessee provided documents showing the source of payments. Rs. 10,00,000 and Rs. 8,00,000 were paid from the joint SBI account, which included transfers from Vijaya Bank and Syndicate Bank, funded by the sale of land and unsecured loans. Additional payments were made from a Canara Bank account in Mrs. Meena Sharma’s name, which included unsecured loans and a transfer from the assessee’s account.
A housing loan of Rs. 20,00,000 was taken from Canara Bank, and Rs. 8,00,000 was paid in cash. The assessee and his wife also used their savings and accumulated capital.
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The tribunal found the source of the assessee’s share of the investment adequately explained. It noted that the issues of unsecured loans and jewellery proceeds had not been examined by the AO or CIT(A). It directed the AO to delete the addition of Rs. 41,47,382 as unexplained investment under Section 69 of the Act.
In conclusion the appeal filed by the assessee was allowed.
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