2015 (10) TMI 933 - AT - Income Tax

Addition under S.69 - unexplained investment - CIT(A) deleted part addition - Held that - The Assessing Officer made the addition of ₹ 21,50,000 under S.69 of the Act, as the assessee could not explain the sources for the capital introduced by the assessee to his satisfaction. As for the amount of ₹ 6,50,000 claimed by the assessee to have invested from out of own funds, it comprises of (a) accumulated savings out of income from property and agriculture; and (b) contract receipts. The CIT(A) accepted the first source, since the amount represented by the same to the extent of ₹ 1,50,000 has been received from out of banking channels. As for the balance amount of ₹ 5,00,000 represented by contract receipts, in the absence of any cogent evidence, brought on record by the assessee, in support of the said claim, as the net presumed net profit/margin as available to the assessee, would not support the cause of the assessee that entire contract receipts are available for making the investment, more so, since the year under consideration was shown as the first year of contract and there was no accumulated sources of income other than the marginal incomes from the property and agricultural income. We do not find any infirmity in the view taken by the CIT(A) with regard to the own sources, by accepting the claim of the assessee partly. We accordingly reject the grounds of the assessee as well as the Revenue on this aspect, in their respective appeals. Even with regard to the amounts borrowed from mother, Smt. Anees Nadiraa and a distant relative, Shri Abdul Kareem, the reasoning given by the CIT(A) cannot be found fault with. The former being assessee s mother, and the money having been lent from banking channels, there is no dispute with regard to either identity or genuineness of the transaction. Since the said creditor was also claimed to have been assessed to tax, the Assessing Officer ought to have verified the particulars given, if he has any doubt with regard to the credit-worthiness or genuineness of the transaction. Even with regard to other creditor, Mr.Abdul Kareem, the amount was claimed to have originated from an NRE Account with Andhra bank, and the said creditor having been away from the country, his wife, Smt. Fatima was claimed to have filed the confirmation letter on behalf of her husband. Merely on the ground that confirmation letter was filed by another person, the genuineness of the transaction cannot be doubted, since there can be no doubt with regard to either identity of the creditor and his credit-worthiness, or the genuineness of the transaction. In this view of the matter, we do not find any infirmity in the view taken by the CIT(A), while accepting the sources explained by the assessee for investing the capital, by borrowing the monies from these two persons, viz. mother and distant relative - Decided against assessee and revenue.

Summary

Issues Involved:
Appeals against addition made under S.69 of the Act for unexplained investment.

Analysis:
1. Issue of Unexplained Investment:
The case involved cross-appeals for the assessment year 2007-08 regarding the addition made by the Assessing Officer under S.69 of the Act for unexplained investment. The assessee had invested an amount of Rs. 21,50,000 in M/s. Vistas Constructions, claiming it to be sourced from loans and contract receipts. The Assessing Officer treated the capital contribution as unexplained due to insufficient information on the sources. The CIT(A) confirmed the addition partially, considering different aspects of the investment. The CIT(A) accepted part of the explanation for the investment from own sources but questioned the creditworthiness of the loan creditors. The Assessing Officer failed to verify the particulars furnished by the assessee before concluding on the creditworthiness issue. Ultimately, the CIT(A) deleted the addition of Rs. 15,00,000, emphasizing the established identity of the creditors and genuineness of the transactions.

2. Assessee's Appeal and Revenue's Appeal:
Both the assessee and the Revenue were aggrieved by the CIT(A)'s decision. The assessee contended that the sources for the investment were adequately explained, while the Revenue challenged the relief granted by the CIT(A). The Tribunal considered the submissions and orders of the Revenue authorities. Regarding the investment claimed from own funds, the Tribunal upheld the CIT(A)'s decision to accept part of the explanation, rejecting the appeals from both sides on this aspect. The Tribunal also found no fault with the reasoning behind the loans from the mother and distant relative, as the identity and genuineness of the transactions were established. Thus, the Tribunal upheld the CIT(A)'s order rejecting the grounds of the Revenue on this matter.

3. Interest Calculation Issue:
The assessee raised a ground related to the charging of interest under S.234A and S.234B of the Act, arguing that the interest calculation was not in accordance with the Act. However, no specific arguments were presented during the hearing, and the Tribunal found no merit in this ground, thus rejecting it. Consequently, both the appeals of the assessee and the Revenue were dismissed, and the order was pronounced on July 31, 2014.