2016 (5) TMI 528 - AT - Income Tax

Unexplained investment u/s 69 - Held that - The assessing officer is under an obligation to give reasons for not accepting the explanation so offered by the assessee in the present case the assessing officer has not come out with any corroborative evidence or cogent material to demonstrate that the assessee has actually expanded the amount towards the purchase of the land, more than what has been documented. Hence in our considered opinion the said transaction does not fall within the ambit of section 69 of the act. - Decided against revenue

Summary

Issues:
Appeal against deletion of addition under section 69 of the Income Tax Act for unexplained investment.

Analysis:
The case involved an appeal by the department against the deletion of an addition of ?55,30,000 made by the Assessing Officer under section 69 of the Income Tax Act. The assessee had purchased a property for ?55,30,000, but claimed that the actual value was ?2,80,000 as per the agreement to sell. The Assessing Officer added the higher amount as income of the assessee under section 69. The assessee submitted various documents and argued that the stamp duty was paid as per circle rates and the sale consideration was as per the agreement to sell. The CIT(A) observed that the Assessing Officer's addition was based on suspicion without concrete evidence and without conducting any enquiry with the parties involved.

The CIT(A) highlighted the provisions of section 69, emphasizing that for an investment to be treated as income, it must fulfill two conditions: not recorded in the books of account and unsatisfactory explanation by the assessee. The CIT(A) noted that the Assessing Officer did not provide sufficient evidence to show that the assessee had paid more than the documented amount for the property. The CIT(A) cited legal precedents to support the argument that the Assessing Officer's addition was based on presumption and not supported by facts or a legal basis.

The Revenue challenged the CIT(A)'s order, arguing that the property's actual value could not have been as low as claimed by the assessee. However, the Tribunal agreed with the CIT(A) and held that the Assessing Officer's application of section 50C for unexplained investment under section 69 was impermissible. The Tribunal reiterated the conditions for a transaction to fall under section 69 and concluded that the Assessing Officer failed to provide evidence to support the addition. Therefore, the Tribunal upheld the CIT(A)'s findings and dismissed the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition under section 69. The judgment emphasized the importance of concrete evidence and a valid legal basis for making additions under the Income Tax Act, highlighting the need for Assessing Officers to follow due process and provide justifications for their decisions.