2022 (12) TMI 399 - HC - Income Tax

Unexplained money - Assessee had deposited the amount in his bank after receiving the same from his father-in-law - lower authorities were in error in confirming the assessment on the ground that the WILL was not properly notarized or registered and on the further ground that creditworthiness of the father-in-law is not established in view of undisputed fact that there was no cash credits - HELD THAT - It is settled that tax authorities cannot record any findings with regard to validity of the Will. They may look into any Will for satisfying themselves with regard any transaction. In view of the authority in Daulat ram Rawatmull and the fact that another sum of Rs.25 Lakhs has been paid to assessee's co-brother under the very same Will and there has been no enquiry in that regard, we are of the view that the findings recorded by the CIT(A) by making critical analysis with regard to validity of the Will are not sustainable. ITAT has upheld the order of CIT(A). Therefore, the said order is also unsustainable. If the CIT(A) was not satisfied with the source, he could have enquired into the matter by issuing notice to the legal representatives of the assessee's father-in-law. Admittedly, no such enquiry was conducted. Therefore, additions could not have been sustained by the CIT(A) based on surmises and incorrect application of law - The question of law raised in this appeal is answered in favour of the Assessee.

Summary

Issues:
Assessment of Rs.24,75,400 based on the notarization of WILL and creditworthiness.

Analysis:
The case involved an appeal against an order passed by the ITAT, Bengaluru Bench, regarding the assessment year 2009-10. The main issue was whether the lower authorities erred in confirming the assessment of Rs.24,75,400 based on the notarization of the WILL and the establishment of creditworthiness of the father-in-law. The appellant contested that the money deposited in the bank was received from his father-in-law, citing legal precedents to support his claim that ownership of money could be established even if the source explanation was incorrect.

The appellant argued that the father-in-law had given the money to his wife, and the lower authorities had erred in their decision. However, the Revenue contended that the WILL of the father-in-law was fabricated, questioning his financial capacity to provide such a sum. The CIT(A) had noted inconsistencies in the appellant's statements and upheld the Assessing Officer's decision, which was also confirmed by the ITAT.

Upon careful consideration, the Court found that the appellant had deposited the amount in question, claiming it was received from his father-in-law. The Court highlighted that the tax authorities cannot question the validity of a WILL but can examine it for transactional purposes. The Court noted that no inquiry was made into another sum paid to the appellant's co-brother under the same WILL, indicating a lack of thorough investigation by the authorities.

The Court ultimately allowed the appeal, ruling in favor of the Assessee and against the Revenue. It was emphasized that the additions to the assessment could not be sustained based on surmises and incorrect application of the law, as no proper inquiry was conducted into the matter. The Court found the findings regarding the validity of the WILL to be unsustainable, leading to the decision in favor of the Assessee.