2020 (10) TMI 1194 - AT - Income Tax

Addition u/s 69 - investment not recorded in the books of accounts - HELD THAT - We find that there is no specific finding which has been recorded by the ld CIT(A) regarding the source of investment being the unsecured loan taken from Shrishtianand Builders and Colonizers - AO in the remand report has also merely gone by the bank statement of Shrishtianand Builders and Colonizers and confirmed the genuineness of the loan transaction. Where a loan transaction has been claimed to be entered into by the assessee, the necessary attributes of such loan transaction in terms of tenure, purpose, rate of interest, repayment and hypothecation/guarantee for availing such loan transaction needs to be substantiated by the assessee and which needs to be examined by the AO. Disbursement of loan and its utilization for making the aforesaid investment needs to be verified. There is no finding recorded by either of the two authorities and the matter has been summarily decided. Such a finding clearly deserve to be set-aside and the matter needs to be examined a fresh as per law. Unsecured loan transaction with M/s Grass Field Villa Pvt Ltd to be satisfactorily explained which we again found to be unacceptable - CIT-A referred to balance sheet, income tax return and bank statement of M/s Grass Field Villa Pvt Ltd and another firm by name of M/s Grass Field Farms and Resorts Pvt ltd to hold the transaction to be duly explained however, he has again failed to consider the necessary attributes of such loan transaction in terms of tenure, purpose, rate of interest, repayment and hypothecation/guarantee for availing such loan transaction and no finding has been recorded by him in this regard. Similar finding has been recorded by the ld CIT(A) regarding loan transaction with Mahender Kumar Meena which deserve to be set-aside to be examined afresh. During the course of hearing, the ld AR has sought to submit additional evidence by way of bank statement of Shri Ashish Choudhary in support of another unsecured loan transaction of ₹ 26,00,000/- which again needs to be verified. Investment being made out of assessee s own funds - No finding recorded by either of the two authorities as to the claim of the assessee regarding investment being made out of assessee s own funds. Once the investment has been made during the year vide registered sale deed dated 21.11.2011 and the assessee claims the same to be made out of his own funds, then, it is incumbent on part of the assessee to corroborate the same with his books of accounts and the taxing authorities are required to verify the same and record a finding as to their satisfaction or otherwise of such claim being made by the assessee and whether the source of such investment has been found duly explained or not. Source of investment through loan transaction as well as own funds in purchase of the aforesaid pieces of land through registered sale deeds dated 21.11.2011 including that of the stamp duty needs to be examined afresh. - Both the appeals of the Revenue and the assessee are allowed for statistical purposes.

Issues Involved:
1. Justification of the addition made under Section 69 of the Income Tax Act.
2. Verification of unsecured loans claimed by the assessee.
3. Enhancement of income on account of stamp duty expenses.

Issue-wise Detailed Analysis:

1. Justification of the addition made under Section 69 of the Income Tax Act:
The primary issue revolves around whether the addition of ?2,41,94,900/- under Section 69 by the Assessing Officer (AO) was justified. The AO observed that the assessee had purchased land for ?2,41,94,000/- and was asked to explain the source of funds. The assessee provided purchase deeds and confirmations of unsecured loans from four individuals. However, the AO found discrepancies, such as incorrect addresses and non-compliance with summons, leading him to treat the loans as bogus and add the amount as unexplained investment under Section 69.

Upon appeal, the CIT(A) restricted the addition to ?34,50,000/-, considering additional evidence and the remand report. The Tribunal found that the CIT(A) did not adequately specify how the source of the investment was explained. The matter was remanded back to the AO for a fresh examination of the source of investment, including the verification of loan transactions and the assessee's own funds.

2. Verification of unsecured loans claimed by the assessee:
The assessee claimed to have taken unsecured loans totaling ?82,14,000/- during the financial year 2011-12 and ?33,50,000/- during the financial year 2012-13. The AO questioned the genuineness of these loans, especially since some loan confirmations were not backed by bank statements or income tax returns. The CIT(A) partially accepted the loans but found ?34,50,000/- unexplained.

The Tribunal noted that the CIT(A) did not thoroughly verify the attributes of the loan transactions, such as tenure, purpose, rate of interest, and repayment terms. The Tribunal emphasized the need for a detailed examination of these aspects to determine the genuineness of the loans. The matter was remanded back to the AO for a comprehensive review, including the verification of additional evidence submitted during the hearing.

3. Enhancement of income on account of stamp duty expenses:
The CIT(A) enhanced the assessee's income by ?14,48,700/- on account of stamp duty expenses incurred in cash for the land purchase. The assessee argued that this amount was duly reflected in the balance sheet and paid from disclosed sources. The Tribunal noted that the AO had highlighted this issue in the remand report, which was shared with the assessee, thus providing notice.

However, the Tribunal found that the CIT(A) did not adequately examine the source of the stamp duty payment. The Tribunal directed the AO to re-examine the source of funds used for the stamp duty payment and verify the assessee's claim that it was paid from disclosed sources.

Conclusion:
The Tribunal set aside the findings of the CIT(A) and remanded the matter back to the AO for a fresh examination of the source of investment, verification of unsecured loans, and the source of stamp duty payment. Both appeals by the Revenue and the assessee were allowed for statistical purposes, with the AO directed to provide reasonable opportunity to the assessee during the re-examination process.

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