2022 (7) TMI 482 - AT - Income Tax

Unexplained Investment - assessee filed the return of income along with computation of income stating that the assessee sold gold jewellery of 40 Tulas and used her own savings to purchase the above said property - assessee's representative appeared before the CIT(A) and argued that the transaction was between husband and wife and was no real money exchange in the registration - HELD THAT - We find from the written submissions made by the Ld. AR that the vacant site was purchased on 19/12/2005. The transactions has been registered as a document styled as General Power of Attorney clubbed with possession . Admitted facts are that the husband of the assessee in order to retain the property got the property registered in the assessee's name and has repaid the loans borrowed by him by sale of gold jewellery and personal savings of the assessee. We also find merit in the argument of the Ld. AR that the transactions are between the husband and wife and there was no actual consideration passed on between the husband and wife. The consideration mentioned in the sale deed was only for the purpose of stamp duty determination and hence it cannot be treated as a consideration received by the husband of the assessee nor paid by the assessee. Considering the peculiarity in the nature of transaction in the instant case, we find merit in the Ld. AR's argument that no real consideration has been transferred by the assessee for the purchase of land. In view of the disclosure made by the assessee while filing the return of income as required U/s. 148 of the Act, we are of the considered opinion that section 69 of the Act cannot be invoked as it applies only to the investments which are not recorded in the books of accounts. Actual transfer of money was not done by the assessee to her husband and since the registration was done only to save the property without real consideration, we are of the considered view that the order of the ld. CIT(A) deserves to be quashed and we allow the appeal of the assessee.

Summary

Issues:
Sustenance of addition of Rs. 6 lakhs as unexplained money to the income returned by the assessee.

Analysis:
The appeal was filed against the order of the Ld. CIT(A) in relation to the assessment year 2007-08. The assessee, an individual, purchased an immovable property but failed to file the return of income initially. Notices were issued under section 148 of the Act, and after the assessee responded, the AO added a sum of Rs. 6 lakhs towards unexplained investment to the total income returned. The Ld. CIT(A) confirmed this order based on the sale deed recitals. The assessee argued that the transaction was between husband and wife, with no real money exchange, but the Ld. CIT(A) upheld the addition. The assessee raised multiple grounds in the appeal, challenging the CIT(A)'s decision and emphasizing the lack of cash payment to the husband during the property acquisition.

The main contention revolved around whether the addition of Rs. 6 lakhs as unexplained money was justified. The Ld. AR argued that the property was initially acquired by the assessee's husband through a General Power of Attorney to sell it later, but the assessee decided to retain it and executed a sale deed in her favor. The transaction was deemed to be between husband and wife, with the wife having sold her gold jewelry to repay the husband's loan for the property purchase. The Tribunal found merit in the argument that no actual consideration was exchanged between the spouses, and the sale deed's consideration was primarily for stamp duty purposes. Given the unique circumstances of the case, where no real money transfer occurred and the registration was done to safeguard the property without actual consideration, the Tribunal concluded that section 69 of the Act, pertaining to unexplained investments, was not applicable. Consequently, the Tribunal ruled in favor of the assessee, quashing the CIT(A)'s order and allowing the appeal.

The Tribunal's decision highlighted the specific nature of the transaction between the husband and wife, emphasizing the absence of actual consideration transfer and the registration's sole purpose to secure the property without financial exchange. By analyzing the facts and submissions, the Tribunal concluded that the addition of Rs. 6 lakhs as unexplained money was unwarranted in this scenario. The judgment underscored the importance of considering the substance of transactions over mere documentary evidence, especially in cases involving intra-family dealings where financial exchanges might not align with traditional norms.