Husband Funded Investment in Joint Property Not Taxable: ITAT Deletes ₹2.18 Cr Addition u/s 69A [Read Order]

The appellant, Naliniben Dipakbhai Patel, had e-filed a return of income declaring total income of ₹4,34,050 for the Assessment Year (AY) 2016–17. The case was selected for limited scrutiny through Computer Assisted Scrutiny Selection (CASS) to verify whether the investment and income relating to properties are duly disclosed.

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The Assessing Officer (AO) noted that the appellant had purchased two agricultural lands jointly with her husband. The ppellant explained that the said properties were, in fact, purchased by her husband, Dipakbhai Naranbhai Patel, and that her name was added as joint-owner only for convenience. She furnished a copy of her husband's income tax return for AY 2016–17 along with long-term unquoted investment details.

However, the AO was not convinced and treated 50% of the investment for the share attributed to the appellant as unexplained, making an addition of ₹2,18,19,600 crore under section 69A of the Act.

The assessee challenged the addition before the Commissioner of Income Tax (Appeals) ( CIT(A) ), National Faceless Appeal Centre (NFAC), reiterating that the investment was entirely made by her husband. She submitted his books of accounts, ITRs, and details of loans received, including ₹12.50 lakhs advanced by her to her husband.

The CIT(A) called for a remand report from the AO and the AO questioned the creditworthiness of the husband's lenders and even doubted the appellant's ability to advance ₹12.50 lakhs.

The tribunal bench comprising Sanjay Garg (Judicial Member) and Narendra Prasad Sinha (Accountant Member), that the appellant had duly demonstrated that she herself did not make any investment in the properties. The details of investment were duly reflected in the books of the husband, and the source of investment was also furnished. It held that the burden of proof on the appellant was fully discharged.

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The tribunal concluded that the investigation regarding the creditworthiness of the husband and his lenders ought to have been made in his own assessment. Since no such inquiry was made and no independent investment was proved in the appellant’s hands, there was no basis for the addition.

The appellant was represented by M.K. Patel, while Kavan Limbasiya represented the department.

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