2012 (10) TMI 359 - AT - Income Tax

Addition on account of unexplained investment u/s 69 Assesse made a payment to builder against booking of flats - Assessment of the assessee was reopened u/s 147 on the basis of unexplained finding found in the case of builder Later, identity and creditworthiness of the builder was established by ITAT - Whether AO has authority to dispute the correctness of assessment in respect of transactions in the books of another person on basis of which case of assessee was opened, when such transactions are found to be explained subsequently in case of said another person by Tribunal - Held that - In light of findings of the ITAT in the case of builder, when Revenue have not placed any material, controverting the aforesaid findings. Therefore we are unable to take a different view in the matter. Appeal decides in favour of assessee

Summary

Issues:
1. Addition of Rs.26,80,000 as unexplained investment.
2. Justification for deletion of the addition by the ld. CIT(A).
3. Dispute over the addition by the Revenue.

Analysis:

Issue 1: Addition of Rs.26,80,000 as unexplained investment
The case involved an appeal by the Revenue against the deletion of an addition of Rs.26,80,000 made by the Assessing Officer (AO) on account of unexplained investment. The assessee had made a payment to a builder for booking flats, and the source of this payment was questioned. The AO added the amount as unexplained investment, prompting the reopening of the assessment. However, the ld. CIT(A) deleted the addition based on the appellant's explanation that the payment was made from funds received earlier and was duly reflected in the balance sheet. The CIT(A) found supporting evidence and concluded that the AO's doubts were unfounded.

Issue 2: Justification for deletion of the addition by the ld. CIT(A)
The ld. CIT(A) based the deletion of the addition on the appellant's detailed submissions and documentary evidence. The appellant provided proof that the payment made for booking the flats was a refund from earlier deposits. The CIT(A) noted that the appellant had successfully rebutted the AO's contentions with documentary evidence, including bank statements and certificates from the builder. Additionally, the ld. CIT(A) considered the findings in the case of the builder and upheld that the appellant had a valid explanation for the investment, which was also reflected in their financial records. The CIT(A) concluded that the AO's decision to add the amount as unexplained investment was unjustified.

Issue 3: Dispute over the addition by the Revenue
The Revenue appealed the CIT(A)'s decision before the ITAT, arguing that the addition should not have been deleted. However, the ITAT upheld the CIT(A)'s findings, emphasizing that if the transactions in the builder's case were explained, the AO could not dispute the correctness of those transactions in the appellant's case. The ITAT referenced a relevant Supreme Court case to support their decision, highlighting that the burden of proof had been discharged by the appellant. The Revenue failed to provide any material to counter the CIT(A)'s findings, leading the ITAT to dismiss the appeal and uphold the deletion of the addition.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the deletion of the addition of Rs.26,80,000 as unexplained investment by the ld. CIT(A). The decision was based on the appellant's satisfactory explanation supported by documentary evidence and the lack of contradictory material presented by the Revenue.