Rs. 1.10 Crore Property Investment Treated as Unexplained Due to Unverified Sources: ITAT Sets Aside CIT(A) Order [Read Order]
The ITAT noted that for co-purchasers, the addition cannot exceed the individual’s share and that the authorities had rejected the assessee’s documents without independent verification.
Property - Investment - ITAT - taxscan
Property - Investment - ITAT - taxscan
The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) set aside the Commissioner of Income Tax (Appeals)[CIT(A)] order in a case where a property investment of Rs. 1.10 crore was treated as unexplained under section 69 of Income Tax Act,1961 due to unverified sources.
Rajesh Laxmichand Jain,appellant-assessee, had purchased an immovable property for Rs. 1.10 crore during FY 2015-16 (AY 2016-17). He did not file his income tax return for the year, and the case was reopened under section 148 on 30.03.2023.
Notices under section 142(1) were issued, and in response to the show-cause notice dated 09.02.2023, he submitted on 02.03.2023 that the property was acquired jointly with his wife, funded partly through a loan of Rs. 77,62,926/- from Axis Bank, his personal contribution of Rs. 37,94,057/-, and his wife’s contribution of Rs. 3,00,000/-.
The assessment completed under sections 147 and 144 on 15.02.2024 treated the entire investment as unexplained under section 69, as he did not provide evidence for his personal contribution. On appeal, the CIT(A) found that the documents submitted did not adequately explain the source of funds and upheld the addition.
The assessee then filed an appeal before the ITAT challenging the CIT(A)’s order.
The assessee counsel submitted that the CIT(A)’s order had errors. He stated that the property was jointly owned with his wife, each holding a 50% share, but the entire amount had been added to the assessee’s income. He explained that the housing loan from Axis Bank of Rs. 77,62,926/- included the assessee’s contribution of Rs. 38,81,463/-, and the remaining funds of Rs. 40,94,057/- (assessee’s share Rs. 37,94,057/-) included a loan from Vallabh Shah.
Bank records showed that all payments were made from the assessee’s account with The Satara Sahakari Bank Ltd on 11.07.2015, 05.08.2015, and 27.08.2015. The counsel argued that the payments were from genuine sources, and no addition under section 69 was justified. He also pointed out that treating the entire property investment as the assessee’s income was arbitrary.
The departmental counsel supported the CIT(A)’s order but agreed that the case should be sent back to the AO for fresh verification of the source of funds.
The two member bench comprising Beena Pillai (Judicial Member) and Arun Khodpia (Accountant Member) observed that for co-purchasers, the addition could not exceed the individual share of the assessee. It noted that the authorities had rejected the assessee’s documents without independent verification. To ensure justice, the tribunal set aside the CIT(A)’s order and sent the case back to the AO to verify the source of investment and decide the matter afresh.
The assessee was to be given a reasonable opportunity to be heard in the reassessment. The appeal was allowed for statistical purposes.
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