2016 (8) TMI 870 - AT - Income Tax

Unexplained investments - non furnishing on clarifications on the Balance loan amount - Held that - Authorised Representative drew our attention to the certificate dated 19.02.2010 issued by the Karnataka Bank Ltd that ₹ 40,29,328/- was received from Standard Chartered Bank towards loan account of assessee on 22.03.2007 and the assessee s saving bank account was credited with ₹ 66,21,768/- on 30.03.2007 and supported the loan transactions with bank statements, certificates and loan against properties letter dated 15.03.2007. Further, we found that on comparison with the value of property disclosed by the assessee as on 31.03.2006 is ₹ 49,03,162/- and the said value as of 31.03.2007 is ₹ 1,24,45,907/- and the differential value of construction cost spent during the financial year is ₹ 75,42,745/- and the assessee supported the cost with Karnataka Bank loan and disbursement from the Standard Chartered Bank Housing loan amount of ₹ 1,07,00,000/-. Further, the loan source cannot be treated as income for assessment. Therefore, we are of the opinion that Commissioner of Income Tax (Appeals) has elaborately discussed viz-a-viz considered the assessee submissions and the loan documents and allowed the appeal. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) and dismiss the grounds of the Revenue. - Decided in favour of assessee.

Summary

Issues:
- Appeal against order of Commissioner of Income-tax (Appeals)-IV, Chennai in ITA No.779/13-14 for the assessment year 2007-2008 under sections 271(1)(c) and 250 of the Income Tax Act, 1961.
- Discrepancy in loan disbursement and investment source.
- Assessment of unexplained investments leading to penalty proceedings.
- Dismissal of penalty by Commissioner of Income Tax (Appeals) and subsequent appeal by Revenue before Tribunal.

Analysis:

1. Discrepancy in Loan Disbursement and Investment Source:
The case involved the assessment of an individual engaged in money lending, who declared a total income of ?1,03,412 for the assessment year 2007-2008. The Assessing Officer noted an increase in the value of a property in Bangalore and sought clarifications on the source of investment. The individual had borrowed a loan of ?1,07,00,000 from a bank but only ?66,21,768 was disbursed before 31.03.2007. The Assessing Officer added the remaining unexplained amount to the income, leading to a total income of ?41,81,644. The individual appealed against this addition.

2. Assessment of Unexplained Investments and Penalty Proceedings:
The Commissioner of Income Tax (Appeals) dismissed the appeal for non-prosecution initially, but the individual later paid the disputed taxes. Subsequently, penalty proceedings were initiated based on the unexplained investments. The Assessing Officer imposed a penalty of ?11,73,470, stating that the individual failed to substantiate the addition of unexplained investments. The individual argued against the penalty, providing evidence of loan disbursement and closure of the loan account with the bank.

3. Dismissal of Penalty by Commissioner of Income Tax (Appeals) and Subsequent Appeal:
The Commissioner of Income Tax (Appeals) deleted the penalty, emphasizing that the remaining loan amount did not constitute concealment of income. The Commissioner held that the loan liability could not be considered as income for addition. The Revenue appealed this decision before the Tribunal, arguing that the penalty should not have been deleted as the remaining loan amount was not disbursed before 31.03.2007.

4. Tribunal's Decision and Conclusion:
The Tribunal reviewed the evidence and submissions from both sides. It noted that the individual had provided certificates and documents supporting the loan disbursements and construction costs. The Tribunal found that the Commissioner of Income Tax (Appeals) had thoroughly considered the submissions and documents before allowing the appeal. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner of Income Tax (Appeals) to delete the penalty.

In conclusion, the Tribunal upheld the decision to dismiss the penalty imposed on the individual, as the loan amount and investment sources were adequately supported by documentation and explanations.