The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that mere suspicion cannot be grounds for making an addition and deleted the addition of Rs. 18 lakhs.
The assessee has appealed against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year (AY) 2016-17.
For the AY 2016-17, the assessee had filed his income tax returns (ITR) declaring a total income of Rs. 11.47 lakhs.
The assessee’s case was selected for limited scrutiny to verify cash deposits and property transactions. In response to a show cause notice, the assessee explained purchasing property for Rs. 43,00,000, with Rs. 25,00,000 funded by a DCB Bank loan and Rs. 18,00,000 unpaid due to a seller dispute.
The AO paid no heed to the submission of the assessee and added Rs. 18,00,000 as an undisclosed investment and Rs. 11,00,000 as unexplained cash deposits in Karur Vysya Bank.
The assessee appealed before the CIT(A), and the latter partly allowed the assessee’s appeal.
The assessee’s counsel submitted that the CIT(A) wrongly confirmed the Rs. 18,00,000 addition as an undisclosed investment, despite it remaining unpaid due to a seller dispute.
The ITAT observed that even if the full payment is considered, the AO had failed to properly link it to the assessee’s bank details. The bench noted that mere estimation cannot justify treating it as an unexplained investment.
The bench relied on the decision of the Gujarat High Court in the case of CIT vs Star Builders (IT Ref. No. 9 of 1999, order dated 13.11.2006), in which the court held that “mere suspicion cannot be grounds for making an addition.”.
The bench held that AO, as well as the CIT(A), has only presumed that there was payment of Rs.18 lakhs, which is not reflected in any of the accounts or demonstrated by the Assessing Officer that the assessee made only payment of Rs.18 lakhs.
The ITAT, comprising Suchitra Kamble (Judicial Member), allowed the assessee’s appeal.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
