2011 (1) TMI 1247 - AT - Income Tax

Addition u/s 69 of the Act - Unexplained investment Held that - against the claim of assessee that the amounts received as advanced were deposited with the bank-the Tribunal ordered revenue to examine the genuineness of the agreement and the transaction since revenue examined the agreement in compliance to the direction of the Tribunal and the AO has not exceeded his jurisdiction The summons were returned as unserved - Revenue officers deputed for examination found that no such person exists - No material was available on record to contradict the findings recorded by the Revenue about the existence of the persons who said to have given the advances - existence of the persons is doubtful and not proved the agreement as well as the transaction cannot be genuine - Decided against assessee. Receipt as capital receipt - since this was the first year of assessment Held - assessee was carrying on the business from earlier without filing of the return of income - When the genuineness of the transaction as well as the agreement was found to be doubtful and the persons said to have advanced the money were not in existence the revenue rightly made the addition u/s 69 of the Act. - Decide against assessee.

Summary

Issues:
Addition u/s. 69 of the Income-tax Act, 1961 as unexplained investment.

Analysis:
The appeals by two independent assessees were against CIT(A)-V, Hyderabad orders for assessment year 2003-04, concerning the addition u/s. 69 of the Income-tax Act. The assessees, husband and wife, received advances for casurina ballies supply, which were later returned due to dissatisfaction. The contention was that the advances were part of trading activity and not income. The assessees had no other income source, challenging the addition made by the Assessing Officer. The assessees cited legal precedents to support their position, emphasizing that the Assessing Officer exceeded jurisdiction by re-examining the agreement's genuineness. The Assessing Officer received information about bank deposits, questioned the source, and found discrepancies in the assessees' explanations. The matter was remanded to re-examine the agreement's authenticity. The Assessing Officer concluded the transactions were not genuine due to lack of evidence on the advanced persons' existence.

The Tribunal noted the assessees' claim of depositing advances with the bank, directing the Assessing Officer to verify the agreement's genuineness. The Tribunal found the Assessing Officer acted within jurisdiction by examining the agreement per the direction. However, the summons to the advanced persons were unserved, and their existence was not proven, leading to doubts on transaction authenticity. The assessees' argument of the first assessment year being treated as capital receipt was refuted due to their established business history. The Tribunal upheld the lower authorities' decision, confirming the addition under section 69 due to doubts on transaction authenticity and lack of evidence on advanced persons' existence.

The Tribunal dismissed the appeals, citing the absence of infirmity in the lower authorities' orders. The judgement and decisions cited by the assessees were deemed inapplicable to the case's factual context, leading to the confirmation of the lower authorities' orders.

In conclusion, the Tribunal upheld the addition u/s. 69 of the Income-tax Act, finding the transactions not genuine due to unproven existence of the advanced persons and doubts on the agreement's authenticity. The assessees' claims were refuted based on their established business history and lack of evidence supporting their position.