Source of Fund of Joint Purchase of Property by Mother and Son Sufficiently Explained: ITAT Deletes ₹1.36 Cr Addition [Read Order]

Mrs. Roma Prakash Chhugani (assessee), faced an ex-parte assessment order wherein the AO added Rs. 1.36 crore as unexplained investment under Section 69, alleging undisclosed sources for the purchase of a property.

The AO claimed that the assessee failed to respond to notices which were sent to an old address. The assessee became aware of the assessment order only when her bank account was attached for tax recovery in March 2020.

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Aggrieved by the AO’s order, the assessee obtained a copy of the assessment order and filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee submitted that the property was purchased for Rs. 1.43 crore in joint ownership with her son through a registered agreement.

The assessee filed additional evidence before the CIT(A), including bank statements, the registered agreement, loan disbursement certificates, and income tax returns of her son and husband, to substantiate the source of funds.

The CIT(A) forwarded the evidence to the AOfor a remand report. In the remand report dated 11.10.2024, the AO objected to the admission of additional evidence, alleging that the assessee had been given sufficient opportunity during the assessment.

The CIT(A) upheld the AO’s addition. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The Counsel submitted that property was primarily purchased by her son, who had a taxable income of Rs. 89.37 lakh, as evidenced by his income tax return for AY 2011-12.

The Counsel Reiterated the sources of the Rs. 1.43 crore investment: Rs. 20,27,300 from the joint account of the assessee and her husband, Rs. 21,60,527 from her son’s account, Rs. 37,61,175 from her husband’s individual account, and Rs. 63,94,498 from an HDFC housing loan.

The two-member bench, comprising Pawan Singh (Judicial Member) and Prabhash Shankar (Accountant Member), observed that the assessee sufficiently explained her non-appearance due to a change in address.

The Tribunal observed that the assessee substantiated the entire Rs. 1.43 crore investment through documented sources: Rs. 20,27,300 from the joint account, Rs. 21,60,527 from her son’s account, Rs. 37,61,175 from her husband’s account, and Rs. 63,94,498 from the HDFC loan.

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The Tribunal held that the AO’s objection to the additional evidence was untenable, as the assessee had no opportunity to participate in the assessment. It concluded that the assessee had adequately explained the source and capacity for the investment, rendering the Rs. 1.36 crore addition unsustainable.

The Bench deleted the addition of Rs. 1.36 Crore made by the AO. The appeal of the assessee was allowed.

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