2021 (6) TMI 253 - AT - Income Tax

Unexplained investments u/s 69 - income of the assessee from the agricultural operations - HELD THAT - There is neither any discussion in the order of the authorities below nor any submission of the assessee before them (authorities below) suggesting that the assessee was carrying out agricultural operations on the land of the other parties. In the absence of such information, the learned CIT-A, in our considered view has rightly not taken the cognizance of the additional agricultural income of ₹ 12 lakhs. Quantum of the household expenses - The entire amount shown by the assessee was treated as income available for investment. It is not out of place to mention that the assessee has family members such as his brother, brother s wife and his wife. Therefore, some deduction has to be made from the income of the assessee towards the drawing for the household expenses before allocating the same for the purpose of investment. The next issue arises to determine the quantum of the household expenses. Indeed, the assessee is privy to such information. But the assessee has not furnished any information qua to the household expenses. Thus there remains no alternate except to estimate the household expenses on reasonable basis. In this connection, we find that the learned CIT (A) has treated an amount of ₹ 6 lakhs as household expenses but failed to bring any basis for the estimation of such expenses. Therefore in interest of justice and fair play, we deemed it appropriate to treat such expenses to the tune of ₹ 3 Lacs only. It is also important to note that such household expenses should not be taken as the precedent for any other case of the assessee. It is just on ad hoc basis. Benefit considering the past savings of the assessee - In view of the above concurrent findings of the AO for the assessment years 2009-10 and 2010-11 with respect to the past savings and without allocating any expense towards the household expenses, it seems to us that no further benefit to the assessee should be granted. Accordingly we are not convinced with the contention of the learned AR. There was the investment in the Life Insurance premium paid by the assessee and the onus was upon the assessee justify the source of investments based on the documentary evidence which the assessee failed. As such the assessee has issued Gram Sarpunch certificates where in the income of ₹ 20 lakhs from the source of agricultural operation was declared. But the assessee has not brought any evidence suggesting that there was more income earned from the agricultural operations than the certified income of ₹ 20 lakhs. AR made a reference to the judgment of P.K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT but to our humble understanding the ratio of such judgment is not applicable in the case on hand. AO may make the addition on account of unexplained investments under section 69 of the Act, if the assessee failed to justify the source of such investments. Admittedly, the assessee failed to justify the source of investments and therefore we are of the view that addition has been rightly made by the AO which was rightly confirmed by the learned CIT (A). Accordingly, we do not find any reason to interfere in the order of the authorities below except to grant the relief of ₹ 3 Lacs for the household expenses against the estimate made by the learned CIT (A) for ₹ 6 lakhs. - Decided partly on favour of assessee.

Summary

Issues Involved:
1. Addition of ?12,50,000 as unexplained investment.
2. Source of funds for insurance premium payments.
3. Application of Section 69 of the Income Tax Act.
4. Principles of natural justice and verification of explanations.

Detailed Analysis:

1. Addition of ?12,50,000 as Unexplained Investment:
The primary issue raised by the assessee was that the CIT (A) erred in confirming the AO's addition of ?12.50 lakhs out of ?31.5 lakh as unexplained investment under Section 69 of the Act. The AO received information from the Investigation Wing that the assessee had made investments in Bajaj Allianz Life Insurance Company amounting to ?76,64,389/- over three years. The assessee argued that the sources of funds were commission from Bajaj Allianz, loans from relatives, and income from agricultural operations. However, the AO treated the entire ?31.5 lakh as unexplained investment due to lack of detailed evidence.

2. Source of Funds for Insurance Premium Payments:
The assessee contended that he had sizable ancestral agricultural land and provided 7/12 extracts as evidence. Despite this, the AO disregarded the contention, citing the absence of detailed information about loans and agricultural income. The CIT (A) partially accepted the assessee's claim, attributing ?19 lakhs to known sources and treating ?12.50 lakhs as unexplained investments. The CIT (A) considered the general standard of living and the agricultural income certificates but found the investments disproportionate to the known income.

3. Application of Section 69 of the Income Tax Act:
The assessee argued that once the source of investment is explained, Section 69 should not apply. The CIT (A) and the Tribunal found that the assessee failed to provide sufficient evidence to justify the entire investment. The Tribunal noted that in subsequent years, the Revenue accepted agricultural income of ?32 lakhs, but this included income from agricultural operations on others' lands, which was not applicable for the year under consideration.

4. Principles of Natural Justice and Verification of Explanations:
The assessee claimed that the AO did not verify the explanations or conduct further inquiries, violating principles of natural justice. The CIT (A) and the Tribunal acknowledged this but still found the evidence insufficient to explain the entire investment. The Tribunal reduced the household expenses estimate from ?6 lakhs to ?3 lakhs, providing partial relief to the assessee.

Conclusion:
The Tribunal upheld the addition of ?12.50 lakhs as unexplained investment under Section 69, with a minor adjustment for household expenses. The appeal was partly allowed, granting relief of ?3 lakhs against the CIT (A)'s estimate of household expenses. The Tribunal emphasized the need for adequate evidence to justify sources of investment and the proper application of Section 69 when such evidence is lacking.