2022 (11) TMI 63 - AT - Income Tax

Unexplained investment u/s 69 - CIT-A deleted the addition - HELD THAT - CIT A did not examine the assessee whereas the learned AO issued the summons and it was not complied with Without examining the assessee, CIT A reached at the conclusion that assessee is a homemaker and she has fluctuating income. He did not care to look into the fact that assessee has only filed return of income for this year and there is no source of income available with the assessee. He also did not consider the fact that a person who does not have any source of income, how an NBFC could have lent Rs.251 lakhs to such a party and where the price of the property is the same. He also did not examine that what is the actual cost of the property and how the registration, stamp duty expenses have been incurred, if at all such expenses are incurred. He also did not care to examine that how the interest of the above loan could have been serviced. He also did not look into the facts of this NBFC whether it is engaged in the business of housing loan or not. He also did not consider the relationship between NBFC and the assessee family. In view of this, we find that the order of the learned CIT A is not sustainable. We restore the appeal of the learned AO back to the file of the learned assessing officer with a direction to the assessee to furnish all the requisite details, appear before the assessing officer in compliance with the summons u/s 131 of the act, show the credentials of the nonbanking financial company and rational of loan given to the assessee within 180 days from the date of this order. The learned assessing officer may examine the same, give an opportunity of hearing to the assessee, and then decide the issue on the merits of the case. Appeal of AO is allowed for statistical purposes.

Summary

Issues:
1. Addition of unexplained investment in property under section 69 of the Income Tax Act.
2. Consideration of loan from a nonbanking financial company for property purchase.
3. Compliance with summons and submission of required information by the assessee.
4. Examination of the source of funds and legitimacy of the transaction.

Analysis:
1. The appeal was filed by the Income Tax Officer against the order passed by the Commissioner of Income-tax (Appeals) for the assessment year 2014-15, where the addition of Rs.251 lakhs made by the assessing officer as unexplained investment in property was deleted by the CIT (A). The AO contended that the deletion of the addition under section 69 of the Act was erroneous without considering the case facts.

2. The assessee had purchased properties for a total consideration of Rs.251 lakhs, and the AO made the addition as unexplained investment due to non-cooperation and lack of response from the assessee. However, the CIT (A) considered the loan agreement from a nonbanking financial company, confirming the source of funds for the property purchase. The CIT (A) concluded that the loan from the NBFC was from known sources and not unexplained investment, directing the AO to delete the addition.

3. The departmental representative raised concerns regarding the credibility of the loan from the NBFC, the financial capacity of the assessee, and the compliance with summons. It was argued that the CIT (A) did not adequately investigate the source of funds and the relationship between the assessee and the NBFC. The AO's order was deemed more appropriate, and the CIT (A) decision was challenged.

4. The ITAT Mumbai agreed with the departmental representative's arguments, finding that the CIT (A) had not thoroughly examined the case. The ITAT directed the assessee to provide necessary details, appear before the assessing officer, and substantiate the legitimacy of the loan within 180 days. The assessing officer was instructed to reevaluate the case based on the new information provided by the assessee, ensuring a fair opportunity for the assessee to present their case.

This comprehensive analysis highlights the key issues, arguments presented, and the final decision of the ITAT Mumbai regarding the addition of unexplained investment in property and the consideration of a loan from a nonbanking financial company for property purchase.