2025 (2) TMI 578 - AT - Income Tax

Unexplained money u/s 69A - assessee sold his property - CIT(A) deleted addition - assessee has filed detailed reply alongwith the additional evidences alongwith prayer under Rule 46A of the Income Tax Rules 1962 - HELD THAT - The evidences filed in respect of the acquisition of the property were also examined by the AO in the remand proceedings and no contrary view was given by the AO and therefore in our considered opinion the Ld.CIT(A) has rightly deleted the addition made by AO. Accordingly Ground No.1 of Revenue is dismissed. With regard to the claim of loss we find that this transaction was not disclosed by the assessee in the return of income nor any details were filed before the AO. It is the fresh claim of short term capital loss which was made before the Ld.CIT(A) for the first time. As this loss was not claimed in the return of income filed in terms of provision of section 80 of the Act such loss cannot be allowed to be carried forward to the assessee. Addition u/s 69A as unexplained investment - HELD THAT -Assessee alongwith his brother has purchased 20% shares in the property and out of that 20% share brother through an affidavit has affirmed that purchase consideration to the extent of his share of 10% was paid by him out of his own sources. With regard to the source of the investment the assessee has been able to substantiate its claim of making such investment out of explained funds by filing the necessary evidences before the AO during remand proceedings. CIT(A) after considering these evidences has deleted the addition made. As all the payments were made by the assessee were through banking channels and immediate source of the same were duly substantiated therefore we are not inclined to interfere with the order of CIT(A) to this extent. With regard to the issue of payment of Stamp Duty out of loan taken from one Shri Vijay Kumar brother of the assessee we find that the Ld. CIT(A) has accepted the contention of the assessee on the basis of confirmation and bank statement of Shri Vijay Kumar without confronting and obtaining a report from the AO on the same. Under these circumstances the issue of source of investment of INR 32.5 Lakhs in stamp duty is sent back to the file of the AO for making necessary verification. Unexplained cash deposits - AO based on AIR information observed that the assessee has made cash deposits in various accounts - CIT(A) has not accepted the claim of the assessee by observing that under limited scrutiny the AO can examine the investment in property and since the cash deposit was utilized for making investment in properties the AO was well within the jurisdiction to examine the issue - HELD THAT - Form the reasons for selection of assessee s case for limited scrutiny we find that none of the reasons indicate the verification of cash deposited in the bank accounts. AO has enlarged the scope of verification from the investment in property to examine cash deposits in banks which was not permitted in the eyes of law as the reason for limited scrutiny was not for examination of cash deposit in bank accounts. From the perusal of the cash flow statement we find that the assessee has sufficient cash balance when cash was deposited in the bank accounts therefore even on merits also no addition is required to be made in the hands of the assessee. We hereby delete the addition made on account of cash deposited in bank accounts.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

1. Whether the deletion of the addition of INR 63,00,000/- under Section 69A of the Income Tax Act, 1961, by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified.

2. Whether the deletion of the addition of INR 12,90,00,000/- under Section 69A as unexplained investment was appropriate.

3. Whether the CIT(A) erred in confirming the addition of INR 17,65,000/- made by the Assessing Officer (AO) on account of alleged unexplained cash deposits in the bank account.

4. Whether the denial of the short-term capital loss of INR 21,00,000/- on the sale of property was valid.

ISSUE-WISE DETAILED ANALYSIS

1. Deletion of Addition of INR 63,00,000/- under Section 69A

Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, requiring the taxpayer to provide a satisfactory explanation for the source of any money found.

Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) had considered the facts that the property was sold for INR 63,00,000/-, which was acquired for INR 84,00,000/-, resulting in a loss of INR 21,00,000/-. The AO had not provided a contrary view during remand proceedings.

Key Evidence and Findings: The assessee provided evidence of the acquisition and sale of the property, demonstrating the genuineness of the transaction.

Application of Law to Facts: The Tribunal found that the CIT(A) rightly deleted the addition as the transaction was genuine and supported by evidence.

Conclusions: The Tribunal dismissed the Revenue's ground, affirming the CIT(A)'s decision to delete the addition.

2. Deletion of Addition of INR 12,90,00,000/- under Section 69A

Relevant Legal Framework and Precedents: Section 69A requires taxpayers to explain the source of investments to avoid being treated as unexplained.

Court's Interpretation and Reasoning: The Tribunal considered the Remand Report, which confirmed that the assessee and his brother acquired 20% of the property, and the brother's share was paid from his own sources.

Key Evidence and Findings: The Tribunal noted that the assessee substantiated the source of investment through banking channels and necessary documentation.

Application of Law to Facts: The Tribunal found the CIT(A) correctly deleted the addition, as the assessee's investment was from explained sources.

Treatment of Competing Arguments: The Tribunal addressed the Revenue's contention regarding unexplained sources and stamp duty payment, sending the latter issue back to the AO for verification.

Conclusions: The Tribunal partly allowed the Revenue's ground for statistical purposes, remanding the stamp duty issue.

3. Addition of INR 17,65,000/- for Unexplained Cash Deposits

Relevant Legal Framework and Precedents: The scope of limited scrutiny must align with the reasons for selection, and additions outside this scope require proper procedure.

Court's Interpretation and Reasoning: The Tribunal found the AO exceeded jurisdiction by examining cash deposits not covered under limited scrutiny.

Key Evidence and Findings: The assessee provided a cash flow statement showing sufficient cash balance for deposits.

Application of Law to Facts: The Tribunal concluded that the AO's addition was beyond jurisdiction and unsupported by evidence.

Conclusions: The Tribunal deleted the addition of INR 17,65,000/-.

4. Denial of Short-Term Capital Loss of INR 21,00,000/-

Relevant Legal Framework and Precedents: Section 80 of the Income Tax Act requires claims to be made in the return of income for them to be considered.

Court's Interpretation and Reasoning: The Tribunal noted that the loss was not claimed in the return, and thus, could not be allowed to be carried forward.

Conclusions: The Tribunal upheld the CIT(A)'s decision to deny the claim.

SIGNIFICANT HOLDINGS

Core Principles Established:

1. Additions under Section 69A require substantiation of unexplained money or investments, with a proper explanation and evidence.

2. The scope of limited scrutiny must be adhered to, and any expansion requires following due procedures.

Final Determinations:

1. The deletion of the addition of INR 63,00,000/- was affirmed.

2. The deletion of the addition of INR 12,90,00,000/- was partly affirmed, with remand for verification of stamp duty payment.

3. The addition of INR 17,65,000/- was deleted.

4. The denial of the short-term capital loss of INR 21,00,000/- was upheld.