2016 (11) TMI 359 - AT - Income Tax

Addition of unexplained cash credits under section 68 - Held that - We concur with the factual findings of the learned CIT(A) that it has been established that the assessee s son, Dilip Gurnani; daughter Ms. Deepa Hotchandani; brother-in-law Shri Kamal S. Sadhwani and sister-in-law Smt. Manju Kamal Sadhwani, resident and carrying on business abroad, have invested their funds through their bank accounts maintained in India, in the purchase of the said flat. The identity of the investors; close family members and their creditworthiness has been established and the genuineness of the transactions cannot be doubted. We, therefore, uphold the finding of the learned CIT(A) in the impugned order that the amount shown in the names of the four persons (viz. relatives of the assessee) are properly explained and therefore the addition of this amount as unexplained cash credits under section 68 of the Act is to be deleted. - Decided against revenue

Issues Involved:

1. Deletion of addition on account of unexplained cash credit under section 68 of the Income Tax Act, 1961.
2. Admission of additional evidence by CIT(A) without giving the Assessing Officer (AO) an opportunity to rebut, allegedly violating Rule 46A of the Income Tax Rules, 1962.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Cash Credit Under Section 68:

The Revenue challenged the CIT(A)'s decision to delete an addition of ?2,05,22,380/- made by the AO under section 68 for unexplained cash credits. The AO had added amounts attributed to various relatives of the assessee, including Kamal S. Sadhwani, Manju Kamal Sadhwani, Deepa Hopchandani, and Laxmi Bhatia, citing unexplained cash credits.

The CIT(A) examined the evidence, including bank statements, purchase agreements, and affidavits, and concluded that the investments in the flat were made by the assessee's children and relatives, who were NRIs with established identities and creditworthiness. The CIT(A) noted that the actual consideration for the flat was ?88,72,900/- as per the letter of allotment and the purchase agreement, not ?1,51,84,152/- as recorded in the tripartite agreement.

The CIT(A) found that the transactions were genuine, with funds transferred from the relatives' NRI accounts in India. The CIT(A) also noted that the name of Laxmi Bhatia appeared in the allotment letter only because she facilitated the purchase, and she did not invest any of her funds. The CIT(A) concluded that the addition under section 68 was not sustainable and deleted it.

The Tribunal concurred with the CIT(A)'s findings, noting that the identity, creditworthiness, and genuineness of the transactions were established. The Tribunal upheld the deletion of the addition under section 68, dismissing Revenue's ground on this issue.

2. Admission of Additional Evidence by CIT(A) Without Giving AO an Opportunity to Rebut:

The Revenue contended that the CIT(A) admitted additional evidence without giving the AO an opportunity to rebut, violating Rule 46A of the Income Tax Rules, 1962. The Tribunal reviewed the CIT(A)'s findings and found no instance of additional evidence being admitted that required the AO to be provided an opportunity to rebut under Rule 46A.

The Tribunal noted that the documents and details considered by the CIT(A) were already on record and had been filed before the AO during the assessment proceedings. The Tribunal found no merit in Revenue's contention and dismissed this ground of appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal for A.Y. 2008-09, upholding the CIT(A)'s decision to delete the addition under section 68 and finding no violation of Rule 46A in admitting evidence. The order was pronounced in the open court on 16th September, 2016.

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