2020 (10) TMI 786 - AT - Income Tax

Unexplained investment u/s 69 - Material seized in survey action u/s. 133A - verify the source of the investment the case of the assessee was reopened and notice u/s. 147 - source of the fund invested by the assessee has flowed from the partnership firm M/s. KSR Constructions wherein the assessee s spouse is a partner - HELD THAT - Assessee does not have any proximity with M/s. KSR Constructions other than the fact that her spouse is one of the partners in the firm. Amount advanced by M/s. KSR Constructions to the assessee shall be obviously treated as the amount withdrawn by the assessee s spouse from the firm which has to be debited to the assessee s spouse s capital account in the firm s books of account. Just because the books of accounts of the assessee s firm and the assessee s spouse has not been properly maintained or incomplete the nature of the transaction does not change. Amount advanced by M/s. KSR Constructions to the assessee has to be construed as the amount given by M/s. KSR Constructions on behalf of the assessee s spouse. Hence, the first proviso of section 56(2)(vi) shall come into operation in the case of the assessee and accordingly the amount received by the assessee shall be treated as a gift received by the assessee from her spouse. Direct the Ld. AO to delete the addition made in the hands of the assessee invoking the provisions of section 69 of the Act which is further confirmed by the Ld. CIT (A). - Decided in favour of assessee.

Summary

Issues:
- Addition made under section 69 of the Act for unexplained investment of ?12,50,000.

Analysis:
1. Background: The appeal was filed against the order of the ld. CIT (A)-6, Hyderabad for the AY 2009-10. The primary issue revolved around the addition of ?12,50,000 as unexplained investment under section 69 of the Act.

2. Initial Findings: During a survey action, it was discovered that the assessee had invested ?12,50,000 in purchasing agricultural land. The source of this investment was questioned, leading to the addition by the Ld. AO under section 69 of the Act.

3. Assessee's Defense: The assessee provided a confirmation letter from her spouse, stating that the investment was a gift from him. Bank statements were also furnished to support this claim.

4. CIT (A) Decision: The Ld. CIT (A) upheld the addition, stating that the funds for the investment were received from the partnership firm where the assessee's spouse was a partner. The CIT (A) invoked section 56(2)(vi) of the Act, concluding that the amount was not received directly from the spouse, but from the firm.

5. Appellate Tribunal Decision: The Appellate Tribunal analyzed the case and determined that the funds were indeed a gift from the spouse, albeit routed through the partnership firm. It was established that the firm acted on the direction of the spouse. Therefore, the Tribunal applied the first proviso of section 56(2)(vi) and directed the deletion of the addition made under section 69 of the Act.

6. Conclusion: The Tribunal allowed the appeal, emphasizing that the funds were essentially a gift from the spouse, even though the transaction was facilitated through the partnership firm. The Tribunal's decision was based on the application of relevant provisions of the Act and the specific circumstances of the case.

7. Final Note: The Tribunal acknowledged the delay in pronouncing the order due to the Covid-19 pandemic but justified the decision based on exceptional circumstances. Reference to a similar case was made to support the Tribunal's stance.