2025 (1) TMI 1116 - AT - Income Tax

Addition u/s 69/69A - treating all the credit found in bank as unexplained money - AO charging special tax rate 60 percent u/s 11BBE - HELD THAT - Out of a credit amount Rs. 44, 01, 180/- is on account of a home loan copy of home loan disbursal is placed on record otherwise it is evident from the credit entry if such amount is reduced from whole of the addition the addition will reduce to Rs. 28, 80, 494/-. Further if the assessee is allowed deduction under section 80TTA of Rs. 2, 042/- the addition will reduce to Rs. 28, 78, 452/-. Further there is mistake on figure of Rs. 19, 870/- by considering as correct amount will reduce to Rs. 28, 58, 582/-. From the copy of ITR for AY 2016-17 we find that the assessee was having cash-in-hand of Rs. 9, 92, 080/- the return of income for AY 2016-17 filed on 14.09.2016 copy of which placed on record pages 39 to 41 of the paper book. Thus if such credit is allowed the additions is left only to Rs. 18, 66, 502/-. We find that the assessee was engaged in business income is estimated @ 10% the taxable income would be Rs. 1, 86, 650/- which we rounded off to Rs. 2.00 lakhs. Thus the additions made by AO is restricted to Rs. 2.00 lakhs. In the result the grounds of appeal raised by the assessee are partly allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the addition of Rs. 72,81,670/- made by the Assessing Officer (AO) under Section 69 of the Income Tax Act, 1961, treating all bank credits as unexplained money, is justified.
Whether the imposition of a special tax rate of 60% under Section 115BBE of the Act by the AO is appropriate.
Whether the assessee was denied adequate opportunity to present his case, warranting a remand of the case to the CIT(A) or AO.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition under Section 69 of the Act

Relevant legal framework and precedents: Section 69 of the Income Tax Act deals with unexplained investments, where the assessee is unable to provide satisfactory explanation about the nature and source of investments, which may then be deemed as the assessee's income.
Court's interpretation and reasoning: The Tribunal considered the evidence provided by the assessee, including bank statements, cash books, and the home loan disbursement letter. It noted that the AO had made the addition without considering the home loan amount and other legitimate deductions.
Key evidence and findings: The Tribunal found that a significant portion of the credited amount was a home loan disbursed by HDFC Bank, which should not have been treated as unexplained income. The assessee also provided evidence of cash-in-hand and other relevant documents.
Application of law to facts: The Tribunal applied Section 69, considering the evidence of the home loan and other deductions, reducing the unexplained income significantly.
Treatment of competing arguments: The Tribunal acknowledged the assessee's argument that the AO did not consider the home loan and other legitimate deductions. The Revenue's argument for remanding the case was considered but not accepted due to the self-explanatory nature of the evidence.
Conclusions: The Tribunal concluded that the addition should be reduced to Rs. 2.00 lakhs after accounting for the home loan and other deductions.

Issue 2: Imposition of Special Tax Rate under Section 115BBE

Relevant legal framework and precedents: Section 115BBE imposes a higher tax rate on income deemed under certain sections, including Section 69, to discourage tax evasion.
Court's interpretation and reasoning: The Tribunal did not specifically address the imposition of the 60% tax rate under Section 115BBE, as the primary focus was on the validity of the addition under Section 69.
Key evidence and findings: The Tribunal's decision to reduce the addition implicitly affected the application of Section 115BBE.
Application of law to facts: By reducing the unexplained income, the applicability of the special tax rate under Section 115BBE was indirectly addressed.
Treatment of competing arguments: The Tribunal focused on the legitimacy of the addition rather than the specific tax rate applied.
Conclusions: The Tribunal's reduction of the addition implicitly reduced the impact of the special tax rate.

Issue 3: Adequate Opportunity to Present the Case

Relevant legal framework and precedents: Principles of natural justice require that parties be given a fair opportunity to present their case.
Court's interpretation and reasoning: The Tribunal acknowledged the assessee's claim of not receiving notices during the assessment proceedings, but noted that adequate evidence was submitted to the CIT(A).
Key evidence and findings: The Tribunal found that the evidence submitted was sufficient to make a determination without remanding the case.
Application of law to facts: The Tribunal decided that the evidence on record was comprehensive enough to avoid a remand.
Treatment of competing arguments: The Tribunal considered the Revenue's argument for remand but found it unnecessary due to the clarity of the evidence.
Conclusions: The Tribunal concluded that remanding the case would be a futile exercise, and the appeal was partly allowed based on the evidence provided.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal noted, "The additions made by AO is restricted to Rs. 2.00 lakhs," highlighting the adjustment made after considering legitimate deductions.
Core principles established: The Tribunal emphasized the importance of considering all relevant evidence, including legitimate deductions and loans, before making additions under Section 69.
Final determinations on each issue: The Tribunal partially allowed the appeal, reducing the addition to Rs. 2.00 lakhs and implicitly addressing the applicability of the special tax rate.

In conclusion, the Tribunal's judgment focused on ensuring that the assessment was based on a comprehensive evaluation of all relevant evidence, leading to a significant reduction in the addition initially made by the AO. The decision underscores the necessity of adhering to principles of natural justice and considering all pertinent financial documentation in tax assessments.

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