2021 (9) TMI 1114 - AT - Income Tax

Addition u/s 69A - additions made in appellant's capital account - As per assessee it already stood disclosed in the books of accounts - HELD THAT - In the instant case the entries relating to the advances received from Shri Hardev Singh and his son Shri Maninder Singh Sahi from Canada were recorded in the books of accounts and the assessee also explained that this amount was received as an advance for making the investment in the property by the said persons and the assessee was engaged in the property business. A.O. therefore was not justified in invoking the provisions of Section 69A of the Act particularly when the entries were recorded in the books of accounts maintained by the assessee and the explanation relating to the purpose of receiving the advances was given, identity of the person from whom amount was received, was not in doubt, the entries were through banking channel and it is not the case of the A.O. that the assessee went to Canada then put his money in the account of the depositor i.e; Shri Hardev Singh and Shri Maninder Singh Sahi which was remitted back, therefore, the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified particularly when the credit in the similar circumstances from Shri Hardev Singh had been accepted but the advance received from his son Shri Maninder Singh Sahi was doubted and added to the income of the assessee. In our opinion the A.O. was not justified in blowing hot and cold in the same wind pipe. Assessee received the impugned amount through banking channel from Shri Maninder Singh Sahi of Canada for making the investment in the property. The assessee also furnished the relevant details to the A.O. and also requested to summon the concerned parties under section 131 of the Act but the A.O. did not accede to the request of the assessee and made the addition, therefore, the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified. Entries were made in the books of account maintained by the assessee and the entries in question appeared in the ledger account of the assessee, those were appearing in the bank account. The assessee also furnished an affidavit, the statement made therein - the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified. We therefore, delete the addition made by the A.O. and sustained by the Ld. CIT(A) - Decided in favour of assessee.

Issues Involved:
1. Addition of ?99,84,046/- under Section 69A of the Income Tax Act, 1961.
2. Treatment of amounts received as unsecured loans versus unexplained investments.
3. Opportunity for the assessee to rebut the Assessing Officer's (A.O.) findings.
4. Creditworthiness and genuineness of transactions involving funds received from Canada.

Issue-wise Detailed Analysis:

1. Addition of ?99,84,046/- under Section 69A of the Income Tax Act, 1961:
The A.O. invoked Section 69A, treating ?99,84,046/- as unexplained investment. The assessee argued that the amount was received from his maternal cousin's son for investing in immovable property. The A.O. accepted ?19,00,000/- received from Shri Hardev Singh but doubted the remaining ?99,84,046/- received from Shri Maninder Singh Sahi, citing insufficient evidence of creditworthiness and genuineness. The Tribunal noted that the entries were recorded in the books of accounts, and the identity of the persons was not in doubt. The Tribunal concluded that the A.O. was not justified in invoking Section 69A, as the amount was recorded in the books of accounts and the source was explained.

2. Treatment of amounts received as unsecured loans versus unexplained investments:
The A.O. treated the amounts received as unexplained investments rather than unsecured loans. The assessee maintained that the funds were advances for property investment, not unsecured loans, and introduced them in the capital account. The Tribunal observed that the A.O. accepted ?19,00,000/- from Shri Hardev Singh but not the remaining ?99,84,046/- from Shri Maninder Singh Sahi, despite both being related and residing in Canada. The Tribunal found the A.O.’s differentiation unjustified and inconsistent.

3. Opportunity for the assessee to rebut the Assessing Officer's (A.O.) findings:
The assessee contended that the A.O. did not provide an adequate opportunity to rebut the findings and based the decision on presumptions. The Tribunal noted that the assessee furnished all necessary documents, including bank statements, affidavits, and remittance proofs, and requested the A.O. to issue summons under Section 131 for further verification, which the A.O. did not do. The Tribunal held that the A.O. failed to provide a fair opportunity for rebuttal and acted hastily.

4. Creditworthiness and genuineness of transactions involving funds received from Canada:
The A.O. questioned the creditworthiness and genuineness of the transactions, especially the funds received from Shri Maninder Singh Sahi. The assessee provided affidavits, bank statements, and remittance advices to establish the identity and creditworthiness of the lenders. The Tribunal noted that the A.O. accepted similar documents for ?19,00,000/- but not for ?99,84,046/-, which was inconsistent. The Tribunal emphasized that the creditworthiness of Shri Hardev Singh, who provided the funds through his son’s account, was already accepted by the A.O. Therefore, the creditworthiness of Shri Maninder Singh Sahi was irrelevant.

Conclusion:
The Tribunal concluded that the addition of ?99,84,046/- under Section 69A was not justified as the entries were recorded in the books of accounts, the source was explained, and the identity of the persons was established. The Tribunal deleted the addition and allowed the appeal of the legal heir of the deceased assessee.

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