2017 (3) TMI 72 - AT - Income Tax

Unexplained Investments - Held that - Before the AO assessee could not file any documentary evidence to prove the source of funds. Accordingly, original assessment was framed u/s.144 since inspite of giving so many opportunities, assessee did not produce any documentary evidence in support of source of the funds and investments so made in the property. However, before the CIT(A), assessee has filed documents but without appreciating the same, in the remand report, AO again reached to the conclusion that genuineness of transaction was not established. As per paper book placed on record it appears that before CIT(A) the assessee had filed bank statement confirmation and cash flow statement to justify the source of payment. It appears that both the lower authorities had not properly appreciated these documents which goes to the root of issue. Merely on the ground of suspicion the CIT(A) has declined the source of funds explained by the assessee in so far as both the concern who advanced the loan to assessee was group concern of assessee. Thus we set aside both the orders of the lower authorities and the matter is restored back to the file of the AO for deciding afresh after considering all the documents in support of its source of the funds - Decided in favour of assessee for statistical purposes. Addition towards payment made to credit card company - Held that - Assessee is the Director of M/s. Konark Realtors Pvt. Ltd., and therefore the said payments were made by M/s. Konark Realtors Pvt. Ld.. Hence there could have been no addition u/s.69 in the hands of the assessee and since the assessee had not claimed any expenditure, the question of proving whether it was for the purpose of business do not arise in the case of the assessee. Further on perusal of the Ledger Account in the books of M/s.Konark Realtors Pvt. Ltd., we found that the said amounts were also finally debited to the Assessee s personal account whereby even the company has not claimed any expenditure. Thus no merit making addition on account of credit card expenditure.- Decided in favour of assessee

Summary

Issues:
1. Addition of unexplained investments
2. Addition of payment made to credit card company

Analysis:

Issue 1: Addition of Unexplained Investments
The appeal was filed against the order of the CIT(A) confirming an addition of &8377; 2,54,94,229 towards unexplained investments. The Assessing Officer (AO) observed that the assessee purchased a property known as 'Rewa House' for &8377; 1,00,00,000, but the total expenditure incurred by the assessee was &8377; 2,54,94,229. The AO added this amount as unexplained investment due to the lack of verification of the source of funds for the property acquisition. The CIT(A) upheld this decision, stating that the evidence provided by the appellant was not satisfactory in explaining the sources of the funds used for the investment. The appellant argued that the transactions were recorded in the books of accounts and the source of funds was legitimate. The ITAT found that the lower authorities did not properly consider the documents provided by the appellant, which included bank statements and cash flow statements. Considering the totality of the circumstances, the ITAT set aside the lower authorities' orders and remanded the matter back to the AO for a fresh decision after considering the documents provided by the appellant.

Issue 2: Addition of Payment Made to Credit Card Company
The AO added &8377; 6,82,510 towards payments made to a credit card company as unexplained expenditure based on AIR details. The CIT(A) confirmed this addition. However, the ITAT noted that the payments were made by a company of which the assessee was a director, and therefore, there should have been no addition in the hands of the assessee. Since the company did not claim any expenditure and the amounts were debited to the assessee's personal account, the ITAT found no merit in adding the amount as unexplained expenditure. Consequently, the ITAT allowed the appeal in part regarding this issue.

In conclusion, the ITAT partially allowed the appeal, setting aside the additions related to unexplained investments and payment made to the credit card company. The matter was remanded back to the AO for fresh consideration based on the documents provided by the assessee.