2021 (3) TMI 125 - AT - Income Tax

Unexplained investment u/s 69 - HELD THAT - From the plain reading of section 69 it is clear that investments which are made in the financial year immediately preceding the assessment year can only be subjected to addition under the said section. In other words, the investments made in any other assessment year cannot be brought to tax in the relevant assessment year. From the assessment order and on material record, it is clear that the investments / advances of ₹ 17,10,000 was made by the assessee in the financial year 2005-2006, i.e., assessment year 2006-2007. Therefore, investments made in assessment year 2006-2007 cannot be brought tax u/s 69 in the relevant assessment year, namely, A.Y. 2008-2009. For this reason alone, the A.O. was not justified in law in making an addition by invoking the provisions of section 69 of the I.T.Act. The advance paid by the assessee to Shri Narayana Reddy during the assessment year 2006-2007 is stated to be out of sale proceeds of 1 Acre 30 guntas of land belonging to the assessee and her son. Since it is clear that the amount has been advanced for purchase of land in assessment year 2006- 2007, addition u/s 69 of the I.T.Act amounting to ₹ 17,10,000 cannot be made for the relevant assessment year, viz., 2008- 2009. It is ordered accordingly. Unexplained investment u/s 69 - HELD THAT - As assessee had received back a sum of ₹ 4 lakh being part of advance amount paid to Shri Narayana Reddy. This amount of ₹ 4 lakh received from Shri Narayana Reddy was invested in mutual funds. With regard to the bank deposit of ₹ 1 lakh, AO has erroneously came to the conclusion that the assessee has made bank deposit of ₹ 1 lakh. A.O. himself in paragraph 5 of the impugned assessment order had found that on verification of assessee s bank account, there was no such bank deposit on 12.11.2007 of ₹ 1 lakh. Therefore, only the investment made during relevant assessment year is with reference to mutual funds amounting to ₹ 4 lakh. The investment in mutual funds was explained by the amount of ₹ 4 lakh received by the assessee from Shri Narayana Reddy during the relevant assessment year. Therefore, the addition of ₹ 5 lakh is unwarranted u/s 69. Addition u/s 68 - HELD THAT - Addition of ₹ 50,000 as unexplained cash credits in the bank account of the assessee. The said amount has been deposited in Karnataka Bank saving bank account on 07.04.2007 (cash deposit). Before the Assessing Officer, the assessee had stated that the assessee was unable to recollect the source of cash deposit. This was due to old age and the recent surgery she had undertaken, which had resulted into loss of memory. As stated that the cash deposit of ₹ 50,000 made by the assessee may be explained as part of past savings and other receipts. Since the assessee has not given any details with regard to the cash deposits of ₹ 50,000 on 07.04.2007, as confirm this addition.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Unexplained investment u/s 69 of the I.T. Act amounting to ?17,10,000.
3. Unexplained investment u/s 69 of the I.T. Act amounting to ?5,00,000.
4. Addition u/s 68 of the I.T. Act amounting to ?50,000.

Condonation of Delay:
The appeal was filed with a delay of 5 days, and the assessee sought condonation of the delay. The Tribunal, after reviewing the reasons for the delay, found sufficient cause to condone the delay and proceeded to hear the appeal on its merits.

Unexplained Investment of ?17,10,000:
The Assessing Officer had added ?17,10,000 as unexplained investment under section 69 of the I.T. Act in the assessment order. The AO raised questions regarding the source of the investment, the transactions with the recipient, and the lack of explanations from the assessee. However, the Tribunal found that the investment was made in a previous assessment year and could not be taxed in the relevant assessment year. The Tribunal relied on evidence provided by the recipient to establish that the amount was for the purpose of purchasing land and had been repaid partially in subsequent years.

Unexplained Investment of ?5,00,000:
The AO added ?5,00,000 as unexplained investments in mutual funds and bank deposits. However, the Tribunal found that a significant part of this amount was explained by funds received from the recipient of the investment. The Tribunal concluded that only the investment in mutual funds amounting to ?4,00,000 was relevant for the assessment year, and hence, the addition of ?5,00,000 was unwarranted and was deleted.

Addition of ?50,000 under Section 68:
The AO made an addition of ?50,000 as unexplained cash credits in the bank account of the assessee. The assessee attributed the cash deposit to past savings and other receipts due to memory loss from old age and recent surgery. As the assessee failed to provide specific details regarding the source of the cash deposit, the Tribunal upheld this addition.

In conclusion, the appeal filed by the assessee was partly allowed, with the Tribunal ruling in favor of the assessee on certain issues related to unexplained investments while upholding the addition under Section 68 for the unexplained cash credits.