2017 (11) TMI 1078 - AT - Income Tax

Unexplained investment under section 69 - case of the assessee is that he has received ₹ 7 lakhs from Shri P. Surya Prakasa Rao towards advance for sale of assessee s property, which was utilized for the purpose of deposit in the account of fixed deposit - Held that - When Assessing Officer asked Shri P. Surya Prakasa Rao, he submitted that he was a retired employee and borrowed money from his friends and pledged his wife s jewellery and advanced to the assessee, but not able to explain what is the amount borrowed and what is gold pledged, by which, how much amount borrowed, has not given any details before the Assessing Officer and even before the ld. CIT(A). Even before us, the assessee failed to explain creditworthiness of Shri P. Surya Prakasa Rao and genuineness of the transaction also. Under these facts and circumstances of the case, simply filing confirmations, is not a sufficient to discharge burden casted upon him to explain the source in the fixed deposits. Therefore, we are of the opinion that the assessee has failed to discharge the onus in respect of ₹ 7 lakhs received from Shri P. Surya Prakasa Rao and therefore, the Assessing Officer has rightly made an addition and the same is confirmed by the ld. CIT(A). So far as amount received from Shri L. Dileshwara Rao,Shri L. Dileshwara Rao has explained before the Assessing Officer that he has given ₹ 30 lakhs in three installments i.e. ₹ 10 lakh each. When Assessing Officer asked the assessee in respect of amount received from Shri L.Dileshwara Rao and also bank entries, the assessee has failed to explain the same before the Assessing Officer, even before the ld.CIT(A) and even before us also no explanation is given. Under the above facts and circumstances of the case, we are of the opinion that the assessee failed to discharge the burden casted upon him that he has received ₹ 30 lakhs from Shri L.Dileshwara Rao and therefore the ld. CIT(A) rightly confirmed the addition made by the Assessing Officer. Credit in the assessee s bank account with Shalantri Branch - assessee has stated that this credit represent advance received from one P. Appa Rao for sale of Relliveedhi site - Held that - Before the ld. CIT(A) it was submitted that Shri P. Appa Rao is a Manson and had given an amount of ₹ 2,96,500/- by way of advance for purchase of acre 2.5 cents of land, and that Shri P.Appa Rao expressed his inability to mobilize further funds, the transaction was cancelled and the amount was returned on 01/07/2009. Before the ld. CIT(A) except stating that advance received in respect of purchase of land from P. Appa Rao, who is not able to mobilize the funds, the amount was returned, no evidence is filed. Even before us, the assessee has not filed any evidence. Under these facts and circumstances of the case, we find that the assessee failed to discharge the burden casted upon him that he has received the said amount as advance and therefore, we find no infirmity in the order passed by the ld.CIT(A) in confirming the addition made by the Assessing Officer. Assessee appeal dismissed.

Summary

Issues Involved:
1. Unexplained investment under section 69 of the Income Tax Act.
2. Unexplained credits under section 68 of the Income Tax Act.

Detailed Analysis:

1. Unexplained Investment under Section 69:

The primary issue revolves around the addition of ?39,74,113/- as unexplained investment under section 69 of the Income Tax Act. The assessee initially declared a total income of ?5,86,454/-, which was later revised to ?8,05,000/-. The Assessing Officer (AO) noted discrepancies in the fixed deposits and capital account between the original and revised returns. The AO found that the revised return was not valid under section 139(4) and did not consider it. Two major sources were cited for the fixed deposits: ?7,00,000/- from Sri Palisetti Suryaprakasarao and ?30,00,000/- from Laveti Dileswara Rao.

The AO disallowed the ?7,00,000/- from Sri Palisetti Suryaprakasarao, as he was a retired employee without the capacity to advance such an amount. Similarly, the ?30,00,000/- from Laveti Dileswara Rao was disallowed due to a lack of evidence and discrepancies in the bank statements. The AO concluded that the source for ?39,74,113/- was unexplained under section 69.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the revised return was invalid and the assessee failed to prove the nature and source of the investments satisfactorily. The CIT(A) emphasized that the burden of proof lies with the assessee to substantiate the claims, which was not met in this case. The CIT(A) also found discrepancies in the transactions and the explanations provided by the assessee, leading to the confirmation of the addition.

The Tribunal agreed with the findings of the AO and CIT(A), noting that the assessee failed to discharge the burden of proof regarding the creditworthiness and genuineness of the transactions. The Tribunal upheld the addition of ?39,74,113/- as unexplained investment under section 69.

2. Unexplained Credits under Section 68:

The second issue pertains to the addition of ?2,96,500/- as unexplained credits under section 68 of the Income Tax Act. The AO noted a credit of ?2,96,500/- in the assessee’s bank account, which the assessee claimed was an advance from one P. Appa Rao for the sale of a site. However, the assessee failed to provide any documentary evidence to substantiate this claim. Consequently, the AO added the amount as unexplained credits under section 68.

The CIT(A) upheld the AO's decision, noting that the assessee did not provide any evidence to support the claim that the amount was an advance for the sale of land. The Tribunal also agreed with the findings of the AO and CIT(A), stating that the assessee failed to discharge the burden of proof regarding the source of the credit. The Tribunal confirmed the addition of ?2,96,500/- as unexplained credits under section 68.

Conclusion:

The appeal filed by the assessee was dismissed, with the Tribunal upholding the additions made by the AO and confirmed by the CIT(A). The Tribunal found that the assessee failed to discharge the burden of proof regarding the unexplained investments and credits, leading to the dismissal of the appeal.