2013 (7) TMI 202 - HC - Income Tax

Unexplained investment - borrowing from son-in-law - Proof of salary and possession of jewellery and the sale of it - Held that - the assessee was stated to be working as a Teacher in International Maritime Academy from the financial year 2001-02 to 2005-06. Although the assessee was called upon to produce bill regarding salary and other details, except photocopies of Form 16, no materials were furnished. Apart from this fact, the claim of the assessee that part of the consideration came from the sale of jewellery also appear to be not true. Regarding money received from son-in-law - Held that - It may be seen that one of the questions posed to the son-in-law was that whether a sum of Rs.15 lakhs was given as a loan, while originally he said no, immediately, he changed it and stated that it might be considered loan without interest. On a specific question whether the loan was returned by the assessee to Senthil Kumar, while stating that it was not returned, he continued that the assessee had returned the share of property and gifted it to her daughter. Thus, the reading of the statement shows the unreliability of the claim made by the assessee as regards the receipt of money from her son-in-law. No hesitation in holding that the assessee had not discharged the burden as regards the source from which the investment had been made. - Order of ITAT is not correct - Additions upheld - Decided in favor of revenue.

Summary

Issues:
1. Whether the Tribunal correctly found the source of deposit by the assessee?
2. Whether the investment in immovable property was explained adequately by the assessee?
3. Whether the claim of sale of jewellery and source of funds for investment were proven?
4. Whether the son-in-law's financial transactions and contributions were legitimate?
5. Whether the Tribunal's decision to set aside the assessment was justified?

Analysis:
1. The case involved a block assessment from 01.04.1996 to 21.02.2003 following a search under Section 132 of the Income Tax Act. The dispute centered around the source of a deposit of Rs.22 lakhs by the assessee, Mallika, for purchasing a share of immovable property. The Revenue challenged the Tribunal's finding on the source of deposit based on precedents.

2. The assessee claimed the investment was funded through sale of jewellery, a loan from her son-in-law, and her salary. However, discrepancies arose regarding the sale of jewellery, with the auctioneer disclaiming any knowledge of the auction. The Assessing Officer added Rs.5,70,095 to the assessee's income due to unproven claims.

3. The son-in-law's involvement in the transaction was scrutinized, with his statement indicating a direct contribution of Rs.15 lakhs for the property purchase. Verification revealed various credit entries in his accounts, raising questions about the legitimacy of the transactions. The Tribunal upheld the Commissioner's decision to set aside the assessment at the hands of the assessee.

4. The Tribunal also addressed the possession and sale of jewellery, with discrepancies in the explanations provided by the assessee and her son-in-law. The Tribunal found the evidence presented insufficient to support the claim of sale of jewellery, leading to the deletion of the Rs.22 lakhs addition.

5. Ultimately, the High Court overturned the Tribunal's decision, holding that the assessee failed to prove the source of the investment adequately. The Court found discrepancies in the son-in-law's transactions and the lack of evidence supporting the claimed source of funds. Consequently, the Tax Case Appeal was allowed, confirming the Assessing Officer's order and disallowing the Tribunal's decision to set aside the assessment.