Large Addition of ₹1.11 Cr Unsustainable as Investment Duly Recorded in Books and Paid Through Banking Channel: ITAT [Read Order]
The Tribunal observed the criteria for invoking Section 69, which requires a twin condition which is an investment not recorded in the books and an unsatisfactory explanation of its nature and source.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that an addition of ₹1,11,00,000 made under Section 69 of the Income Tax Act, 1961, was unsustainable and ruled that the investment was duly recorded in the company's books of account and the payment is made through a proper banking channel.
Abuchi Infra Ventures Limited (assessee) filed Return of Income (ROI) declaring an income of ₹1,27,520. The case was selected for limited scrutiny under the Computer Assisted Scrutiny Selection (CASS) system for the issue "Investment/Advances/Loans" and "Investment in immovable property"
The Assessing Officer (AO) noted from the Annual Information Return (AIR) that the assessee had entered into a property transaction amounting to ₹1,11,00,000. Due to non-compliance from the assessee's side the AO proceeded to treat the entire transaction as unexplained income and made an addition of ₹1,11,00,000 under Section 69 of the Income Tax Act.
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Aggrieved by the AO's order, the assessee appealed to the Commissioner of Income tax (Appeals) [CIT(A)]. The assessee submitted additional evidence, including a ledger account for the property captioned advance against property detailing the ₹1.11 crores investment and a copy of the registered sale deed dated May 2, 2019, which concluded the transaction.
The CIT(A) admitted the additional evidence under Rule 46A but remanded the issue to the AO for a report, which the AO failed to submit despite multiple reminders. The CIT(A) dismissed the appeal although the additional evidence demonstrated the amount was recorded in the book of account.
Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee argued that Section 69 can only be invoked when an investment was not recorded in the books of account.
The assessee argued that since the investment was made through the banking channel and duly recorded in the company's books, the AO lacked the jurisdiction to invoke Section 69 of the Income Tax Act.
The two-member bench comprising S. Rifaur Rahman (Accountant Member) and Anubhav Sharma (Judicial Member), observed that the assessee had recorded the transaction in its books of account and submitted all relevant information before the CIT(A).
The tribunal observed that the investment was recorded in the books and the payments were through a proper banking channel which was acknowledged by the First Appellate Authority. and the AO’s failure to submit a remand report which formed the basis of deletion of addition.
The tribunal concluded that the CIT(A) erred in sustaining the addition based on suspicion, as the assessee had proved that the investment was recorded and its source and nature were explained.
Therefore the tribunal deleted the addition of ₹1,11,00,000. The appeal of the assessee was allowed.
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