2016 (5) TMI 342 - AT - Income Tax

Addition u/s. 69 - undisclosed investment - Held that - The investment has been made under the arrangement of an MoU and the other persons have a beneficial interest in the property. In this regard, we find that the assessee has made investment of ₹ 6,50,000/- only in the property and the other two persons namely; Shri Arvindbhai Patel and Shri Vinodbhai Solanki has made the investment of ₹ 65,00,000/- and ₹ 58,94,325/- respectively. The investment has been made under the arrangement of an MoU and same was accepted by the other two persons. It is not in dispute that the pay-orders have been purchased from their bank accounts and have been given to the revenue authorities. Therefore, the decision of the Assessing Officer holding that the investment belonged to the assessee was not justified and addition u/s. 69 cannot be made in the hands of the assessee. Accordingly, the CIT(A) has rightly deleted the addition in question. The CIT(A) has also rightly observed that the source of investment by the other two persons, who have owned the amount of investment in the land, was not clear. He also pointed out that since the other two parties have owned the investment, the Assessing Officer should have to investigate the source of investment in their respective hands by initiating appropriate proceedings and in case they were not assessed with the Assessing Officer, the concerned Assessing Officer should have to pass on the information to the jurisdictional Assessing Officer for taking the necessary action. Having observed so, the CIT(A) was justified in deleting the addition - Decided in favour of assessee Addition u/s 68 - loan received through banking channels - Held that - It is not in dispute that these parties are assessed to income-tax, having PAN and also they have confirmed the fact of granting loan to the assessee. Moreover, it is also pertinent to note that the Assessing Officer has made this addition without inviting objections from the assessee and without giving reasonable opportunity of being heard. There is nothing on record to suggest that the Assessing Officer has issued any summons to the respective parties. In this case, we find that the depositors in this case are established their identity and genuineness of the transaction as the transactions were routed through the banking channel; more so, the assessee has submitted the confirmation from the two depositors, indicating the PAN and address of the concerned. With regard to creditworthiness, the primary onus to prove the unsecured loan was established by the assessee by providing the name, address and PAN of the depositors. Thus, the onus was shifted upon the Assessing Officer to prove that the contention of the assessee was not correct by making necessary enquiries under the powers vested u/s 133(6) and 131 of the Income-tax Act. There is no material evidence on record to suggest that the Assessing Officer has discharged his onus, i.e, the burden of proof; therefore, the addition in question is not justified and the same is directed to be deleted.- Decided in favour of assessee

Summary

Issues Involved:
1. Addition of income under section 68 of the Act related to loans received through banking channels.
2. Deletion of income addition made on account of unexplained investment in property under section 69 of the Act.

Analysis:

Issue 1: Addition of Income under Section 68 of the Act
The assessee and Revenue filed cross-appeals against the order of the Commissioner of Income Tax (Appeals). The assessee contested the addition of ?20,00,000 under section 68 of the Act for loans received from Jayambe Traders and Smt. Rekha N. Patel. The assessee argued that the parties were assessed to income tax, had PAN, and confirmed the loan, questioning the lack of opportunity to be heard. The Revenue's sole ground was the deletion of income addition of ?1,32,97,025 under section 69 of the Act. The CIT(A) upheld the addition under section 68. However, the Tribunal found that the depositors' identity and transaction genuineness were established through banking channels. The Assessing Officer failed to prove otherwise, leading to the deletion of the addition.

Issue 2: Deletion of Income Addition on Unexplained Investment
The assessee's cross-objection challenged the income addition made on account of an unexplained investment in property. The assessee clarified that the investment was made by two other individuals, not by her. The CIT(A) deleted the addition, which the Revenue opposed, arguing it was an unexplained investment under section 69. The Tribunal found that the investment was made by the other individuals as per a Memorandum of Understanding, and they had a beneficial interest in the property. The CIT(A) rightly deleted the addition, emphasizing the need for investigation into the other parties' sources of investment. The Tribunal upheld the CIT(A)'s decision, stating that the addition in question was unjustified and directed its deletion.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal and cross-objection. The addition under section 68 was deleted due to lack of evidence against the depositors' creditworthiness. The deletion of income addition related to unexplained investment in property was upheld, emphasizing the need for investigation into the sources of investment by the other parties involved.