2024 (11) TMI 1027 - AT - Income Tax

Best judgment assessment u/s 144 - Unexplained Investment u/s 69 (in Mutual Funds) - additional evidences were submitted by the assessee under rule 46A of the IT Rules - HELD THAT - We observed that assessee is a non-resident and maintaining non-residential status for more than 15 years. The assessee is a regular filer of return of income declaring income sourced from India. We observed that AO has made the addition with the observation that no response was received from the assessee. Based on that, he proceeded to complete the assessment u/s 144 of the Act based on the information available on his record. We observed that there is no proper opportunity was extended to the assessee during the current assessment proceedings because of that assessee has submitted various information after draft assessment order. However, the AO has not considered those informations. Even before ld. CIT (A), assessee has submitted additional informations under Rule 46A of the Rules. Ld. CIT (A) as per information available on record remanded the matter back to Assessing Officer. However, the Assessing Officer did not accept or verify the additional evidences forwarded by the ld. CIT(A). CIT(A) deleted the additions made by the AO on investment in mutual fund during the current assessment year - We observed that the findings given by ld. CIT (A) are based on the information very much available on record and it is also fact on record that assessee is an NRI and all the source of income are from his salary income earned by the assessee outside India - No reason to disturb the findings of the ld. CIT (A) considering the fact that all the informations are traced from the bank statements submitted by the assessee. Therefore no reason to disturb the findings of the ld. CIT (A). Accordingly, ground raised by the Revenue is dismissed. LTCG on sale of equity oriented mutual funds - Since the transaction falls u/s 10(38) accordingly ld. CIT (A) deleted the addition - CIT (A) has considered various informations submitted before Assessing Officer as well as in remand proceedings. Therefore, we are inclined to accept the findings of ld. CIT (A) that these transactions are covered by section 10(38) of the Act. Hence, we do not see any reason to disturb the findings of ld. CIT (A). Accordingly, ground no.(ii) raised by the Revenue is dismissed.

Summary

Issues Involved:

1. Unexplained Investment under Section 69 of the Income-tax Act.
2. Income from House Property.
3. Income from Capital Gains.
4. Admission of Additional Evidence by the CIT (A).

Detailed Analysis:

1. Unexplained Investment under Section 69:

The issue pertains to the addition of Rs. 2,76,30,628/- as unexplained investment in mutual funds under Section 69 of the Income-tax Act. The Assessing Officer (AO) flagged transactions from the Non-filers Monitoring System for the financial year 2014-15, noting significant investments in mutual funds without a corresponding return of income for AY 2015-16. The AO treated the investments as unexplained due to the absence of documentary evidence from the assessee. However, the CIT (A) found that the investments were sourced from the redemption of existing mutual funds and funds remitted from the UAE, as evidenced by bank statements from HSBC and Citi Bank. The CIT (A) criticized the AO for not verifying these documents and deleted the addition, concluding that the assessee provided reasonable explanations and documentary evidence for the source of the investments.

2. Income from House Property:

The AO added Rs. 1,25,187/- to the assessee's income as income from house property, disallowing the house tax claimed against rental income. The CIT (A) noted discrepancies in the house tax receipts, which were related to a different property than the one generating rental income. Consequently, the CIT (A) upheld the AO's addition, confirming that the assessee's evidence was insufficient to justify the house tax claim.

3. Income from Capital Gains:

The AO added Rs. 6,66,430/- as income from capital gains, questioning the lack of documentary evidence. The assessee claimed this amount as long-term capital gain on the sale of equity-oriented mutual funds, which is exempt under Section 10(38) of the Act. The CIT (A) found that the requisite Securities Transaction Tax (STT) was paid, and the transactions were supported by Demat statements. The CIT (A) deleted the addition, accepting the assessee's claim that the gains were exempt under the relevant tax provisions.

4. Admission of Additional Evidence by the CIT (A):

The Revenue contested the CIT (A)'s admission of additional evidence under Rule 46A of the Income-tax Rules, arguing that the AO's remand report had not sufficiently considered these documents. The CIT (A) observed that the AO had failed to verify the additional evidence properly, which included bank statements and other relevant documents. The CIT (A) proceeded to adjudicate based on the available evidence, concluding that the additional evidence substantiated the assessee's claims regarding the source of investments and capital gains.

Conclusion:

The Tribunal upheld the CIT (A)'s findings, dismissing the Revenue's appeal. The Tribunal agreed with the CIT (A) that the assessee had provided adequate evidence to support the source of investments and the nature of capital gains. The Tribunal found no reason to disturb the CIT (A)'s conclusions, particularly given the assessee's non-resident status and the consistency of the evidence with prior assessment years. The appeal for the subsequent assessment year, which involved similar facts, was also dismissed based on these findings.