Unexplained Investment Addition Over Co-Owner's Creditworthiness: ITAT Deletes It After Reassessment [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) deleted the unexplained investment addition of ₹33,92,975 after reassessment, holding that the co-owner's creditworthiness was accepted in her reopened assessment.

Ankur Goyal,appellant-assessee,jointly purchased a residential flat in Mumbai with his mother, Smt. Sudha Goyal, and brother, Shri Anuj Goyal, for ₹1,24,26,616 during the relevant year. His share in the property was 45%, valued at ₹62,13,308, but he invested ₹97,05,366.

During assessment, he explained that the investment was funded through a loan of ₹75,23,201 from his NRI siblings (Anuj and Ruchi Goyal), a gift of ₹7,72,000 from his NRI sister (Ruchi Goyal), and transfers of ₹33,92,975 from his mother (Sudha Goyal) and ₹8,48,900 from his father (Vinod Goyal).

The Assessing Officer (AO) doubted the creditworthiness of his mother and treated the ₹33,92,975 received from her as unexplained, taxing it under Section 69 of the Act. And also disallowed the ₹3,96,500 interest claimed under Section 24 of the Income Tax Act, stating that the assessee had not paid the interest and his 45% share in the property was not funded through borrowed money.

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The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition.

Read More: ITAT Rules that the Addition of Unexplained Cash Credit u/s.68 is Invalid After Rejecting the Books of Accounts

The two member bench comprising Satbeer Singh Godara (Judicial Member) and Avdhesh kumar Mishra(Accountant Member) reviewed the case and agreed that any unexplained investment should have been taxed in the hands of the co-owners if their creditworthiness was doubtful. Since the Assistant Commissioner of Income Tax(ACIT), had accepted Smt. Sudha Goyal’s creditworthiness in the reopened assessment, the tribunal found no reason to question it. It reversed the CIT(A)’s decision and deleted the addition of ₹33,92,975.

The appellate tribunal reviewed the disallowance of ₹3,96,500 under Section 24 and asked the AO to check if the assessee’s share of ₹55,91,977 came from borrowed funds. If confirmed, the interest on this amount should be allowed. Any extra investment would not qualify for interest deduction. The ITAT sent the issue back to the AO for verification.

In short, the appeal filed by the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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