2023 (3) TMI 266 - AT - Income Tax

Addition u/s 69 - unaccounted investment in purchase of property - Whether no unaccounted cash was ever invested by the assessee? - HELD THAT - From the relevant part of the assessment order as well as the first appellate order, except copy of MoU, we are unable to see any other documentary evidence to show that the assessee along with her granddaughter Ms Vasudha Sharma invested Rs.50 lakh with the builder and only shown Rs.25 lakh banking transactions to the Department. For making addition u/s 69, it is the duty of the AO to establish by way of cogent and sustainable evidence that the assessee has invested his unaccounted money/income in purchase of property and, in the present case, the allegation of the AO based on copy of MoU cannot be held as sustainable and acceptable in absence of any other positive adverse material against the assessee establishing the factum of investment of Rs.50 lakh including alleged unaccounted investment of Rs.25 lakh in purchase of property. Assessee has successfully demonstrated that he only invested Rs.25 lakh with the builder M/s Gul Properties Pvt. Ltd. through banking channel and by way of a letter dated 12.07.2018 he requested the builder to refund the entire amount cancelling the booking. From the letter of the builder dated 21.08.2018 , it is also clear that the builder has refunded the amount by issuing two cheques through banking channel in the name of the assessee and his granddaughter totaling to Rs.25 lakh. We are unable to agree with the allegations made by the AO in the assessment order which were only based on doubts without any sound basis, hence, we also decline to agree with the observations of the ld.CIT ( A ) while confirming the baseless addition. The grounds raised by the assessee are allowed and the AO is directed to delete the addition.Appeal filed by the assessee is allowed.

Summary

Issues:
Confirmation of addition of Rs. 25,00,000 out of total addition of Rs. 50,00,000 made to the income of the appellant for AY 2016-17.

Analysis:
The appeal challenged the order of the CIT (A) confirming the addition of Rs. 25,00,000 to the appellant's income. The representative argued that no unaccounted cash was invested, and the addition was unjustified, unwarranted, and bad in law. It was contended that the source of the investment was explained, with Rs. 25,00,000 invested through banking channels. The AO's basis for the addition was a photocopy of a Memorandum of Understanding (MOU) found during a search, but the original was not seized. The appellant requested a refund from the builder, who complied by issuing two cheques totaling Rs. 25,00,000. The CIT-DR supported the AO's decision based on the MOU. However, the Tribunal found no substantial evidence beyond the MOU to prove the investment. The appellant successfully demonstrated the legitimate source of Rs. 25,00,000 invested through banking channels and the subsequent refund, refuting the baseless allegations made by the AO. Consequently, the Tribunal allowed the appeal and directed the deletion of the addition.

This judgment highlights the importance of substantiating additions to income with concrete evidence and the burden on the AO to establish unaccounted investments. The Tribunal emphasized the need for sound basis and evidence to support such additions, rejecting baseless allegations. The appellant's successful demonstration of legitimate sources and transactions through banking channels played a crucial role in overturning the addition. The refund from the builder further validated the appellant's claims, leading to the Tribunal's decision to delete the addition. The case underscores the significance of documentary evidence and proper verification in tax assessments to ensure fairness and legality in income additions.