2022 (9) TMI 921 - AT - Income Tax

Unexplained investment in purchase of house property - Source of investment from realization of closing stock and debtors as on 31st March, 2011 - HELD THAT - As regards the claim of realization from debtors it is apparent from the balance-sheet filed by the assessee during the proceedings before the CIT(A) for the preceding assessment year showing closing balance of sundry debtors therefore, this claim of realization is contrary to the balance of debtors as on 31st March, 2011. However, without going into these unreliable claims and figures which are not matching to each other if this amount is considered as available to the assessee for making the investment after realizing the closing stock as well as debtors, then the estimation made by the CIT(A) on this account of Rs. 5,00,000/- would be unjustified and without any basis. Hence, in the facts and circumstances of the case, when the CIT(A) has accepted the correct figure of Rs. 9,08,300/- as shown in the return of income, then to that extent, the source from realization of closing stock and debtors ought to have been accepted. Accordingly, the addition sustained by the CIT(A) of Rs. 6,00,000/- is restricted to Rs.1,81,700/- - Appeal of the assessee is partly allowed.

Summary

Issues:
Challenge to addition made by Assessing Officer regarding unexplained investment in house property.

Analysis:
1. The appellant, an individual engaged in trading of bricks, filed a return of income under section 44AD. The assessment was reopened by the Assessing Officer regarding an investment made in a house property. The Assessing Officer made an addition of Rs. 16,08,333/-, which was later restricted to Rs. 6,00,000/- by the CIT(A). The appellant contested this addition before the Tribunal, focusing on the source of investment and the correctness of the figures considered.

2. The appellant argued that the CIT(A) did not consider the correct details of cash balance, bank balance, and assets. The appellant submitted a balance-sheet showing the sale of closing stock as the source of investment in the house property. The CIT(A) accepted only Rs. 5,00,000/- as realization from the sale of closing stock and debtors, contrary to the appellant's claim of Rs. 11,00,000/-. The appellant contended that the addition sustained by the CIT(A) was unjustified and should be deleted.

3. The Departmental Representative argued that the appellant's balance-sheet was prepared during the appellate proceedings and was not supported by any basis. The DR supported the CIT(A)'s decision to grant a substantial relief and relied on the impugned order. The DR contended that the CIT(A) had made a proper and reasonable decision in restricting the addition.

4. The Tribunal noted that the Assessing Officer had initially considered incorrect figures but the CIT(A) rectified this error. The CIT(A) considered the appellant's claim of realization from closing stock and debtors, estimating it at Rs. 5,00,000/- instead of the claimed Rs. 11,00,000/-. However, the Tribunal found that the correct figure of Rs. 9,08,300/- should have been accepted as the source of investment. Therefore, the addition sustained by the CIT(A) was restricted to Rs. 1,81,700/-, and the appeal was partly allowed.

This detailed analysis of the judgment highlights the issues raised, arguments presented by both parties, and the Tribunal's decision based on the facts and legal provisions involved in the case.