2019 (2) TMI 716 - AT - Income Tax

Unexplained investment u/s 69 - non acceptance of explanation furnished by assessee in respect of certain loans taken by him - Held that - The investments are recorded in the bank account and secondly, the assessee has explained the source of said deposit i.e. out of loan received from his two sisters, who had sufficient agricultural landholding and had also carried on agricultural activity on the said land. The assessee produced the receipts of sale of pulses and onions during the year. The plea of assessee was rejected on the ground that it was difficult to link the agricultural receipts to actual demand draft purchased. There is no merit in the observations of CIT(A) in this regard and reversing the same, we delete the addition made in the hands of assessee, where the assessee has explained the nature of entries completely. - Decided in favour of assessee.

Summary

Issues:
1. Addition made under section 69 of the Income Tax Act on account of loans received from different parties treated as unexplained investment in the hands of the assessee.

Detailed Analysis:
1. The appeal was filed against the order of CIT(A)-3, Pune, concerning the assessment year 2011-12 under section 143(3) of the Income-tax Act, 1961. The primary issue raised in the appeal was the addition made under section 69 of the Act regarding loans received from various parties, treated as unexplained investments by the assessee.

2. The assessee explained that cash deposits in bank accounts totaling ?31,20,000 and ?6 lakhs were received from different individuals, including amounts from his uncle, brother-in-law, and father-in-law. However, the Assessing Officer disregarded the explanations and treated the cash deposits as unexplained investments, adding a total of ?37,20,000 to the assessee's income. Another addition of ?25 lakhs was made on account of amounts received from the assessee's sisters.

3. Before the CIT(A), the assessee submitted confirmations, 7/12 extracts of agricultural land, and receipts of sale of agricultural produce to support the explanations for the loans received. However, the CIT(A) did not accept the submissions, stating that there was no direct link between the agricultural receipts and the cash deposits. The explanations provided by the loan givers were also not accepted.

4. The Authorized Representative for the assessee argued that all explanations and evidence were furnished before the authorities, emphasizing the substantial income earned by the parties providing loans. The representative contended that when funds were deposited through demand drafts, no addition under section 69 should be warranted for unexplained investments. Various evidences were presented to support this argument.

5. The Tribunal analyzed the loans received by the assessee from his brother-in-law and uncle, amounting to ?8,70,000 and ?8,30,000, respectively. The CIT(A) had rejected the explanations provided by the assessee, citing lack of direct linkage between agricultural receipts and cash deposits. However, the Tribunal found merit in the evidence submitted by the assessee, including the quantum of agricultural income earned by the loan givers, and reversed the addition of ?8,30,000 and ?8,70,000.

6. Regarding the addition of ?25 lakhs received as a loan from the assessee's sisters, the Tribunal noted that the amount was directly deposited into the bank account for property purchase. The Tribunal accepted the explanations provided by the assessee, including the agricultural activities of the sisters and the sale receipts of agricultural produce, and reversed the addition made by the Assessing Officer under section 69 of the Act.

7. Consequently, the Tribunal allowed the appeal of the assessee, deleting the additions made on account of the loans received from different parties, as the explanations and evidence provided were found to be satisfactory.

This comprehensive analysis highlights the key arguments, evidences, and decisions made in the judgment, addressing the issues raised in the appeal.