2018 (4) TMI 876 - AT - Income Tax

Unexplained investment u/s. 69/69C - identity and genuineness could not be proved - as per CIT-A sources of the investment made by the assessee towards purchase of four residential flats are fully substantiated - Held that - CIT-A accepted confirmations filed by the assessee without any verification while it was incumbent on him to have satisfied after making necessary verifications / enquiry itself that the assessee has not adopted circuitous route to channelize its own black money as the payments made to the assessee by lenders is preceded by the entries in bank account of the similar amounts and further enquiries ought to had been made by learned CIT(A). We are of the considered view that this matter need to be restored to the file of the AO for denovo adjudication of the issues on merits in accordance with law after making proper and necessary enquiries/verifications and the assessee be directed to produce necessary documents/evidences in support of its contentions to prove the identity, creditworthiness and genuineness of these transaction - Appeal of the Revenue is allowed for statistical purposes.

Issues Involved:
1. Substantiation of sources of investment towards the purchase of four residential flats.
2. Deletion of addition made by the Assessing Officer under Sections 68/69C of the Income-tax Act, 1961.
3. Timeliness of the Revenue's appeal filing.

Issue-wise Detailed Analysis:

1. Substantiation of Sources of Investment:
The Revenue challenged the learned CIT(A)'s decision, arguing that the sources of investment made by the assessee towards the purchase of four residential flats were not fully substantiated. The assessee had declared a stock-in-progress of ?1,37,71,100/- in its return of income, which included the purchase cost of ?1,12,00,000/- and stamp duty and registration cost of ?25,71,100/-. The flats were purchased from Gurunanak Developers India P. Ltd. and were shown as closing work-in-progress instead of investments, which was later corrected by filing a revised statement of account. The AO's investigation revealed discrepancies in the stamp duty paid and the market value of the flats, suggesting an attempt to evade stamp duty. The AO questioned the sources of funds, which included loans from directors and shareholders, and doubted the genuineness of these transactions due to the immediate credits in the lenders' bank accounts before lending to the assessee.

2. Deletion of Addition under Sections 68/69C:
The AO treated the entire amount of ?1,37,71,100/- as unexplained investment under Sections 69/69C, as the assessee failed to prove the genuineness of the transactions and the identity of the lenders. The learned CIT(A) accepted the assessee's contentions and deleted the addition made by the AO. However, the tribunal observed that the learned CIT(A) accepted the confirmations filed by the assessee without any verification. The tribunal emphasized that it was incumbent on the learned CIT(A) to have called for information from the builder and verified the sources of loans to ensure that the assessee had not adopted a circuitous route to channelize its own black money.

3. Timeliness of the Revenue's Appeal Filing:
The tribunal noted that there was confusion regarding the date of receipt of the appellate order by the Revenue. While the form no. 36 mentioned the date of communication of the appellate order as 25.11.2015, the authorization memo indicated that the order was received on 04.01.2016, making the last date for filing the appeal 03.03.2016. The tribunal concluded that the appeal was filed within the stipulated time and admitted the appeal.

Conclusion:
The tribunal decided to restore the matter to the file of the AO for a de novo adjudication on merits. The AO was directed to conduct proper and necessary enquiries/verifications and provide the assessee with an opportunity to produce necessary documents/evidences to prove the identity, creditworthiness, and genuineness of the transactions. The tribunal emphasized that the AO should also investigate the variation in the valuation of the flats between the agreement value and the stamp duty valuation. The appeal of the Revenue was allowed for statistical purposes.

← Previous Next →