2022 (11) TMI 662 - AT - Income Tax

Unexplained investment - undisclosed income earned - AO being not satisfied with the submission of the assessee holds that source of investment in purchase of land to the extent remained unsubstantiated and added the same to the return income of the assessee - HELD THAT - Assessee had duly explained the source of deposit i.e previous years saving and we have no hesitation to accept the same , as it would been presumed that this small amount of Rs. 2,21, 000/would have been accumulated or saved by her from various activities undertaken by her for and on behalf of family in last many years . No additions can be made by lower authority. Further even if we ignore the explanation, for the sake of argument, then also it is for the assessing officer to bring on record some cogent evidence to prove that the amount deposited in the bank was undisclosed income arising from the business or from any other activities. No evidence has been brought on record by the lower authorities. The intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case - a discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. In the present case, the discretion had not been properly exercised by the ITO and the ld. CIT(A) in taking into account the circumstances in which the assessee was placed and in view of that matter we hold that the past saving and receipt from relatives and family members would be genuine sources of investments of disputed amount. Thus, the amount stands explained. Appeal filed by the assessee is allowed.

Summary

Issues:
Assessment of undisclosed income based on unexplained investments.

Analysis:
The appellant filed an appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals) concerning the Assessment Year 2011-12. The appellant raised several grounds of appeal, contending that the order of the CIT(A) was contrary to facts and law. The main issue revolved around an amount of Rs. 4,93,984, which the lower authorities added to the return income of the assessee as undisclosed income. The appellant argued that this amount was invested from past savings of the appellant and her family members and not from undisclosed sources. The AO found the source of investment in the purchase of land unsubstantiated and added it to the return income. However, the CIT(A) partially granted relief by accepting some explanations provided by the appellant regarding the source of funds. The appellant further contended that the addition made by the lower authorities was arbitrary, illegal, and unwarranted.

During the proceedings, the Ld. CIT(A) accepted some explanations provided by the appellant, such as the sale of a tractor, cash withdrawals, and contributions from family members, but confirmed the remaining amount of Rs. 4,93,984 as unexplained. The appellant's argument was supported by a decision of the ITAT Agra Bench in a similar case, where it was held that the assessing officer must bring cogent evidence to prove that the deposited amount was undisclosed income. The Tribunal emphasized that the discretion under section 69 should be exercised based on the facts of each case and that the source of investment should not be treated as income solely on unsatisfactory explanations by the assessee.

The Tribunal noted that the discretion under section 69 was not properly exercised by the lower authorities in the present case. Considering the circumstances and explanations provided by the appellant, it was held that the past savings and contributions from family members were genuine sources of the disputed amount. Therefore, the addition of Rs. 4,93,984 as undisclosed income was deleted, and the appeal filed by the assessee was allowed.