2016 (7) TMI 255 - AT - Income Tax

Unexplained investments - Assessee was asked to explain the cash deposit of ₹ 91,50,000 - assessee explained that out of ₹ 91,50,000, source of ₹ 71,00,000 is Proceeds from sale of property by her husband - AO examined it and found sale deed is only for ₹ 21,20,000 - assessee explained balance sum of ₹ 49,80,000 received in cash - purchaser of the property denied any such payment - AO made addition as unexplained investment u/s 69 Held that - Assessee s husband was maintaining only a NRE account in India where it is not possible to give credit for Indian rupees as per RBI/FEMA Rules. The fact that the assessee s husband had declared total sale consideration of ₹ 71,00,000 and had paid the capital gain tax is not in dispute. Therefore, taxing the same amount in the hands of assessee will tantamount to double taxation which is highly inappropriate, harsh and bad in law and not permitted. No material has been brought on record by any of the authorities below. The assessee had no other source of income from which cash could have been deposited by her in her bank account. Therefore, making the assumption that such a large sum has been deposited from the unexplained sources cannot be accepted whereas the assessee has submitted proper and reasoned explanation. In the circumstances and facts of the case, the Ld. CIT(A) is not justified in confirming the substantial part of deposit as income from unexplained investments in the hands of the assessee which is directed to be deleted - Decided in favour of assessee.

Issues Involved:
1. Justification for confirming the addition of ?67,38,500 credited in the bank account as unexplained.
2. Whether the appellant's explanation regarding the source of the bank credits satisfies the requirements under section 68 of the Income-tax Act.
3. The appropriateness of disbelieving the statement of the appellant's legal heir concerning the additional amount received from the sale of property.
4. The propriety of rejecting the appellant's explanation regarding the source, genuineness, and capacity of the transaction.
5. Consideration of the appellant's lack of other income sources and the Department's evidence.
6. The appropriateness of the assessment of ?67,38,500 as unexplained investment under section 69 of the Income-tax Act.

Detailed Analysis:

1. Justification for Confirming the Addition of ?67,38,500:
The appellant contested the confirmation of ?67,38,500 as unexplained credits in the bank account. The officers below considered this amount unexplained because the buyer of the property denied paying the additional ?49.80 lakhs, and there was no substantial evidence provided by the appellant to support the claim.

2. Explanation of Source Under Section 68:
The appellant claimed that the credits were from the sale proceeds of her husband's property, including an additional amount received as on-money. The sale deed reflected ?21,20,000, and the appellant asserted that the remaining ?49,80,000 was also part of the sale proceeds. However, the Assessing Officer found the explanation insufficient due to the lack of corroborative evidence and the denial by the property buyer.

3. Disbelief of Legal Heir's Statement:
The appellant argued that the officers unjustly disbelieved the legal heir's statement about the additional amount received from the property sale. The legal heir, C. P. Gopakumar, confirmed the source of the credit, but the buyer's denial led the officers to reject this claim.

4. Rejection of Explanation on Source, Genuineness, and Capacity:
The appellant's explanation about the source and genuineness of the transaction and the capacity of the legal heir was rejected by the officers. The officers deemed the explanation insufficient under section 68, leading to the addition being confirmed.

5. Consideration of Lack of Other Income Sources:
The appellant highlighted that the deceased had no other income sources. The officers did not present any material evidence to contradict this claim, but they still considered the amount unexplained.

6. Assessment as Unexplained Investment Under Section 69:
The Assessing Officer assessed the entire ?91,50,000 as unexplained investment under section 69, despite the appellant's explanation. The Commissioner of Income-tax (Appeals) gave credit for ?21,20,000 mentioned in the sale deed and ?2,91,500 as rental income, sustaining the addition of ?67,38,500.

Judgment:
The Tribunal found that the appellant's husband had declared the total sale consideration of ?71,00,000 and paid the capital gains tax, which was not disputed. The Tribunal noted that taxing the same amount in the hands of the appellant would result in double taxation, which is inappropriate and harsh. The Tribunal concluded that the appellant provided a proper and reasoned explanation for the bank credits. Therefore, the Tribunal directed the deletion of the addition of ?67,38,500 as income from unexplained investments, allowing all grounds of the appellant.

Conclusion:
The appeal of the assessee was allowed, and the addition of ?67,38,500 was deleted. The Tribunal emphasized that the explanation provided by the appellant was satisfactory and that double taxation in this case was unjustified.

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