2015 (11) TMI 481 - AT - Income Tax

Investment in immovable property - Held that - the issue requires a fresh look by the AO. Documents produced by the assessee before the CIT (A) appears have been not readily available with the AO. In so far as unexplained deposit in Karnataka Bank is concerned, assessee s argument is that it came out of the sale of a property acquired by her in 2007. In the submission made by the assessee before the CIT (A), assessee itself had requested the CIT (A) to call for a remand report from the AO with regard to the documents submitted by her. However, it appears that CIT (A) without calling for the remand report confirmed the addition. We are of the opinion that in the circumstances of the case, CIT (A) ought have examined the claim of the assessee that the deposit in Karnataka Bank had come out of sale proceeds of a property acquired by her in 2007 through the Assessing Officer. Taxability of the said transaction is entirely a different issue which the AO can consider. We are of the opinion that this issue also requires a fresh look by the AO. Addition being the closing balance with UCO Bank - argument of the assessee is that this money was received by her from BBMP for contract work. As per the assessee that debtors account were over stated - Held that - A close verification of this claim is required to see whether the actual billing for the work done by her for BBMP during the previous year included the bills on which payments were received and credited in UCO Bank account. We are of the opinion that this issue also needs to be looked afresh by the AO.

Summary

Issues:
1. Addition of unexplained investment in immovable property
2. Addition of unexplained deposit in Karnataka Bank
3. Addition of closing balance in UCO Bank

Analysis:

1. Unexplained Investment in Immovable Property:
The assessee, engaged in a garden contract business, declared income but faced scrutiny over an investment in an immovable property. The Assessing Officer (AO) disbelieved the source of investment, leading to an addition under 'income from other sources.' The CIT (A) later found evidence supporting the source of funds from the husband's bank account and cheques issued. However, the Tribunal observed discrepancies and remanded the issue for a fresh assessment, suggesting a reevaluation by the AO.

2. Unexplained Deposit in Karnataka Bank:
Another issue arose from unexplained deposits in the assessee's bank accounts, with the AO making additions based on lack of clarity regarding the sources. The CIT (A) partially accepted the explanations but confirmed one addition. The Tribunal noted the need for a detailed examination of the source of funds related to the property sale, directing the AO to reassess this matter separately.

3. Closing Balance in UCO Bank:
Regarding the closing balance in UCO Bank, the assessee claimed it stemmed from payments received for contract work, disputing the overstatement of debtors. The Tribunal highlighted the necessity for a thorough review of the work-bills and payments received, suggesting a reevaluation by the AO to determine the accuracy of the claimed source of funds.

In conclusion, the Tribunal set aside the lower authorities' orders and remitted all three issues back to the AO for a fresh assessment. The appeals were treated as allowed for statistical purposes, emphasizing the need for a comprehensive reexamination of the sources of funds and investments involved in the case.