Property Investment Source Partly Explained through Brother’s Gift and Savings: ITAT Partly reduces Addition u/s 69C [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Chennai Bench, has partly allowed an appeal in a case involving additions under Section 69 of the Income Tax Act, 1961 on the ground of unexplained investments, holding that certain sums invested in property were satisfactorily explained as sourced from personal savings and brother’s gift.

The appeal was filed by Dhanasekaran Ramasamy against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [CIT(A)], for the Assessment Year 2013-14. The matter was heard by a Bench comprising George George K., Vice President, and Padmavathy S., Accountant Member.

The Assessing Officer (AO), acting on information from the Directorate of Income Tax (Intelligence & Criminal Investigation), Salem, found that the assessee had contributed ₹74.35 lakh towards the purchase of two properties on behalf of his partnership firm, M/s Madhuraj Associates.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

As no return of income had originally been filed, the AO reopened the assessment under Section 148. The assessee claimed that ₹32 lakh was actually contributed by another partner, while the remaining amount came partly from gifts received from his brother, mother, and wife, and partly from decades of personal savings since his early employment as a bus conductor.

The AO, stating lack of documentary proof, treated the entire ₹74.35 lakh as unexplained investment. On appeal, the CIT(A) accepted that ₹32 lakh was contributed by another partner and deleted that portion of the addition, but sustained ₹42.35 lakh, rejecting claims of gifts and savings for want of verifiable evidence, and noting that some gifts were not routed through banking channels.

Before the Tribunal, the assessee, represented by Mr. A. Tamilamudan, Chartered Accountant, reiterated that he had a long history of employment and business, enabling him to save substantial amounts, and that the gift from his brother was backed by banking records.

The Department, represented by Mr. S.B. Rajendra Kumar Laghimsetti, JCIT, maintained that the evidence was insufficient to prove the sources.

The Bench held that ₹7.20 lakh shown as an opening balance in the partnership ledger could not be taxed in the relevant year.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

With regards to the gifts, the tribunal observed that, “The gift given by wife and mother are not supported by any documentary evidence that can prove their creditworthiness… With regard to the money received from the brother, the bank statement evidences the transfer and cannot be disregarded merely because there were cash deposits prior to the transfer.”

With regards to the personal savings, tribunal noted the assessee’s employment since 1988 and business activity thereafter, finding it reasonable to accept 50% of the claimed savings as explained. Consequently, it restricted the addition under Section 69 to ₹14 lakh, deleting the balance.

The Tribunal also condoned a delay of 393 days in filing the appeal, accepting the reasons as sufficient cause. It clarified that the decision was based on the specific facts of this case and “cannot be quoted as a precedent in any other case”.

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