Unexplained Investment of ₹10.33 lakh in Immovable Property u/s 69: ITAT Deletes Addition considering Retirement benefits and Loan support [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) deleted an addition of ₹10.33 lakh under section 69 of IncomeTax Act,1961 for unexplained investment in immovable property, considering the assessee’s retirement benefits and loan support.

Somabhai Mohandas Patel,appellant-assessee, had purchased an immovable property during the year under consideration for a total consideration of ₹82,64,025/- along with other co-owners. The Sub-Registrar, Ahmedabad, provided a copy of the registration deed showing that the assessee held a 12.5% share, amounting to ₹10,33,012/-.

The Assessing Officer (AO) observed that the assessee failed to explain the source of this investment despite several notices and treated the amount as income from undisclosed sources under section 69, computing the total income at ₹10,82,434/-.

On appeal before the Commissioner of Income Tax(Appeals) [CIT(A)], the assessee submitted that he had borrowed ₹4,00,000/- from M/s Jay Ambe Sales Agency, owned by his daughter-in-law, Mrs. Urmila Kalpeshbhai Patel, and furnished documents including the sale deed, PAN, and bank statements. As these were submitted for the first time, they were forwarded to the AO for verification.

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The AO reported that the property was purchased on 14/03/2012, while the alleged borrowing was on 24/03/2012, and the assessee failed to provide a creditor confirmation or proof of repayment, casting doubt on the claim.

The CIT(A) concurred with the AO and confirmed the addition of ₹10,33,012/- as income from undisclosed sources under section 69. The assessee then appealed against the CIT(A)’s order dismissing his appeal.

The assessee counsel stated that the assessee was a 70 year old retired Government employee who had served nearly 30 years as an Instructor at an Industrial Training Institute. He received retirement benefits of ₹12,63,448/- and pension income of ₹1,16,976/- for July 2010 to March 2011.

The assessee also borrowed ₹4,00,000/- on 24th March 2012 from a proprietorship firm owned by his daughter-in-law. Based on this, the counsel submitted that the assessee had sufficient funds to invest ₹8,26,410/- in the immovable property.

The two member bench Dr.BRR Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) reviewed the assessment order, the CIT(A) order, and the assessee’s submissions and concluded that the addition of ₹10,33,012/- under section 69 for unexplained investment in immovable property was unjustified.

It noted that the assessee was a retired Government employee who had served nearly 30 years as an Instructor and received retirement benefits of ₹12,63,448/- in 2010, along with pension income of ₹1,16,976/-. These resources showed that he had sufficient funds before purchasing the property.

The tribunal also considered that the assessee borrowed ₹4,00,000/- from a proprietorship firm owned by his daughter-in-law, and there was no finding that the documents were false or unreliable. The bench held that non-response to notices during assessment could not alone discredit the assessee’s explanation, especially when there was no evidence of any undisclosed income.

In view of the assessee’s age, background, retirement benefits, and supporting evidence, the tribunal deleted the addition of ₹10,33,012/- under section 69.

Accordingly the appeal was allowed.

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