2018 (1) TMI 139 - AT - Income Tax

Unexplained investment u/s 69 - Held that - When the purchase of the flat was funded from the loan raised from M/s Citi Finance, therefore, it was incorrect on the part of the lower authorities to conclude that the source of investment in the property was unexplained. We are of the considered view that the lower authorities on the basis of premature observations had taken a hyper technical view and despite the fact that the material available on record clearly revealed that the investment made towards purchase of flat was from the loan raised from Citi Finance, had thus wrongly concluded that the source of investment to the extent of ₹ 36,75,826/- on 31.03.2006 was to be held as an unexplained investment u/s 69 in the hands of the assessee. We are of the considered view that as the investment of ₹ 36,75,826/- is clearly routed to the loan raised from Citi Finance, therefore, the addition of the same as an unexplained investment u/s 69 in the hands of the assessee cannot be sustained. We thus set aside the order of the CIT(A) and delete the addition of ₹ 36,75,826/-. Disallowance of the claim of interest on housing loan raised by the assessee u/s 24(b) - Held that - When the assessee, viz Smt. Shardaben Bhavani, Mr. Dharmesh D. Bhavani (son of the assessee) and Sh. Devaram C. Bhawani (husband of the assessee) are the joint owners of the flat and had as co-borrowers raised the loan for purchase of the property, viz. Flat No. 2001 in Kent Garden Tower, Borivli, Mumbai, therefore, the entitlement of the assessee towards claim of deduction of such interest on housing loan shall be restricted to the extent of her 1/3rd share. We thus direct the A.O to allow deduction of the interest on housing loan to the assessee to the extent of 1/3rd of the aggregate of the interest payable on such loan during the year under consideration. The order of the CIT(A) sustaining the disallowance of the entire amount of the interest on housing loan claimed by the assessee u/s 24(b) is modified in terms of our aforesaid directions. The Ground of appeal No. 4 is partly allowed. Addition u/s 69 - Held that - In the case of the present assessee nothing could be safely gathered from a perusal of the dumb notings in the impugned impounded document. We thus in the backdrop of our aforesaid observations that there is no basis for relating the notings in the impounded document, viz. Annexure A-2 Page 37 with the sale of Flat No. 2001, Kent Garden, Borivali (W), Mumbai, therefore, are of the considered view that the addition of ₹ 54,20,000/- made by the A.O u/s 69 and sustained by the CIT(A) cannot be upheld. We thus set aside the order of the CIT(A) and delete the addition

Summary

Issues Involved:
1. Legality of reassessment under Sec 147/148.
2. Addition under Sec 69 for unexplained investment in property.
3. Disallowance of deduction under Sec 24(b) for interest on housing loan.
4. Addition under Sec 68 for alleged "on money" received from the sale of property.
5. Levy of interest under Sec 234A/B/C.

Detailed Analysis:

1. Legality of Reassessment under Sec 147/148:
The appellant initially challenged the reassessment under Sec 147/148 but did not press this ground during the hearing. Consequently, this ground was dismissed as not pressed.

2. Addition under Sec 69 for Unexplained Investment in Property:
The assessee purchased a flat for ?42 lakh, showing the investment in her balance sheet at ?45,36,929, funded by a loan from Citi Finance. The AO found discrepancies in the loan documents, concluding the investment source was unexplained, leading to an addition of ?36,75,826 under Sec 69. The CIT(A) upheld this, noting the loan documents were in the name of the assessee's son. However, the Tribunal found the flat was jointly purchased by the assessee, her son, and her husband, and the loan from Citi Finance was used for the purchase. It concluded that the investment was explained and deleted the addition of ?36,75,826.

3. Disallowance of Deduction under Sec 24(b) for Interest on Housing Loan:
The AO disallowed the assessee's claim for a ?1,50,000 deduction under Sec 24(b) for interest on a housing loan, as the loan documents were not in her name. The CIT(A) upheld this disallowance. The Tribunal, however, found that the flat was jointly owned and the loan was jointly taken. It directed the AO to allow a deduction of 1/3rd of the interest payable on the loan, as the assessee was a joint owner.

4. Addition under Sec 68 for Alleged "On Money" Received from Sale of Property:
For A.Y. 2007-08, the AO added ?54,20,000 under Sec 68, alleging the assessee received "on money" from the sale of the flat based on loose papers found during a survey. The assessee argued the flat was sold for ?54,00,000, which was already declared, and the loose papers did not pertain to her flat. The CIT(A) upheld the addition, but the Tribunal found no basis for linking the loose papers to the flat sold by the assessee. It concluded that the addition was speculative and deleted the ?54,20,000 addition.

5. Levy of Interest under Sec 234A/B/C:
The levy of interest under Sec 234A/B/C was considered consequential. The Tribunal directed the AO to recompute the interest after giving effect to its directions.

Conclusion:
The Tribunal partly allowed the appeal for A.Y. 2006-07 by deleting the addition under Sec 69 and modifying the disallowance under Sec 24(b). The appeal for A.Y. 2007-08 was fully allowed by deleting the addition under Sec 68.