ITO Vs Kavitha Siddareddy (ITAT Chennai)
ITAT Chennai held that addition towards unexplained investment under section 69 of the Income Tax Act unsustainable as source for purchase of property duly established with necessary evidences.
Facts- During the course of assessment proceedings, it was noticed that the assessee has purchased property for a consideration of Rs.3.40 Crs., and thus, the AO called upon the assessee to explain source for purchase of property. In response, the assessee submitted that she had received unsecured loan of Rs.1.40 Crs. from her husband, Mr.S.V.Ranga Reddy. She further stated that she had drawn a sum of Rs.1.90 Crs. from the partnership firm i.e. M/s.SVR Construction Co., where she was one of the partners, and she had also drawn Rs.60 lakhs from M/s.Vinayak Infra Projects.
Rejecting the arguments of the assessee and made additions towards source for purchase of property as unexplained investment u/s.69 of the Act.
CIT(A) deleted the said additions. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the assessee has established source for purchase of property with necessary evidences and thus, the AO is erred in making additions towards source for purchase of property as unexplained investment u/s.69 of the Act. The Ld. CIT(A) after considering relevant facts has rightly deleted the additions made by the AO and hence, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the Revenue.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-4, Chennai, dated 11.11.2019and pertains to assessment year 2013-14.
2. The Revenue has raised the following grounds of appeal:
1. The order of the Ld. Commissioner of Income Tax(Appeals) is contrary to the law and the facts of the case.
2.1 The Ld. CIT(A) has failed to appreciate the findings of the AO that the partnership firms from which the assessee has stated to have withdrawn Rs.2.50 crores, had not furnished their return of income for the AY 2013-14.
2.2 The Ld. CIT(A) has erred in accepting the contention of the assessee that source for the partnership firms had been explained by merely furnishing copies of work orders obtained by the partnership firms.
2.3 The Ld. CIT(A) has erred in not appreciating the findings the AO that the financials of assessee’s husband disproves the assessee’s claim that source for Rs.1.40 crores was out of loans taken from the firm in which assessee’s husband is partner and that the said firm had also not filed its return of income for the AY 2013-14
2.4 The ld CIT(A) erred in not following the decision of the Hon’ble Apex Court’s rulings in the case of CIT vs P Mohanakala 291 ITR 278 wherein it was held that the transactions though apparent were held to be not real one.
2.5 The ld CIT(A) ought to have noted that as per the mandate of section 69 of the I.T. Act, where an assessee has made investments in respect of which. the assessee is not able to explain the nature and source, the same is deemed to be the income of the assessee.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the.Ld. CIT(A) may be set aside and that of the Assessing Officer restored.
3. The brief facts of the case are that the assessee is an individual filed her return of income for the AY 2013-14 on 31.10.2014 admitting total income of Rs.80,000/-.Information available with the Department shows that the assessee had purchased an immovable property for Rs.3.40 Crs. during the FY 2012-13 relevant to assessment year and market value of the property is at Rs.7.70 Crs. To verify the source for purchase of property, the assessment has been re-opened u/s.147 of the Income Tax Act, 1961 (in short “the Act”) and notice u/s.148 of the Act, dated 28.03.2018 was issued and served on the assessee. In response to the notice issued u/s.148 of the Act, the assessee vide letter dated 10.12.2018 submitted that the return filed on 31.10.2014 may be treated as return filed in response to notice issued u/s.148 of the Act, and also asked for the reasons for re-opening of assessment. The reasons for reopening of assessment was furnished to the assessee. During the course of assessment proceedings, it was noticed that the assessee has purchased property for a consideration of Rs.3.40 Crs., and thus, the AO called upon the assessee to explain source for purchase of property. In response, the assessee submitted that she had received unsecured loan of Rs.1.40 Crs. from her husband, Mr.S.V.Ranga Reddy. She further stated that she had drawn a sum of Rs.1.90 Crs. from the partnership firm i.e. M/s.SVR Construction Co., where she was one of the partners, and she had also drawn Rs.60 lakhs from M/s.Vinayak Infra Projects. The AO called upon the assessee to file necessary evidences, including confirmation letters from the parties, their bank statements, and Income Tax return filed copy for the relevant assessment year. In response, the assessee has filed confirmation letters from Mr.S.V.Ranga Reddy, and their bank statements, and also financial statement along with ITR filed for the relevant assessment year. In respect of M/s.SVR Construction Co.&M/s.Vinayak Infra Projects, she had filed relevant partnership deed of two firms, bank statements.However, could not file ITR filed for the relevant assessment year, because, the firms did not file return of income due to losses. The AO did not accept explanation furnished by the assessee. According to the AO, the assessee could not satisfactorily explain source for purchase of property, although, she claims to have been received unsecured loan of Rs.1.40 Crs. from her husband. The assessee could not file any evidences to justify amount received from partnership firm along with Income Tax return filed for the relevant assessment year by the said firms. Therefore, rejected arguments of the assessee and made additions towards source for purchase of property as unexplained investment u/s.69 of the Act. The relevant findings of the AO are as under:
12. The submissions of the assessee is carefully examined and analyzed as under:
a. On perusal of purchase deed dated 04.03.2013 furnished by the assessee, it is ascertained that the purchase consideration paid by the assessee is at Rs.3,40,00,000/-and Stamp duty paid is at Rs.55,85,400/- against the stamp duty value of Rs.7,70,40,000/-. On perusal of bank statements furnished for the instant AY.2013-14, it is verified that the assessee had made cash deposits to the extent of Rs.23,75,600/-.
b. The assessee by furnishing copy of Form 16A issued by M/s.Indu Projects Ltd in respect of M/s.SVRC and M/s.VIP, had admitted that total gross receipts of the above firms stood at Rs.19,24,94,882/- and Rs.5,52,88,605/-respectively. However, the assessee claimed that due to continuous losses made in their contract works, the partnership firms referred above did not file their Returns of income. Assessee had not substantiated the above claim by furnishing relevant financials of the firms. She had just furnished copies of above stated work orders and bank statements. Assessee could not place proof to show source of funds and creditworthiness of donors was not proved. In the absence of material evidence, source for withdrawal made by the assessee to the extent of Rs..2 Crores from the above referred partnership firms remained unexplained. It is trite law that the initial burden of proving is always on the assessee to show that the property transactions was made out of disclosed sources. Thus the assessee had not discharged burden as regards source from which investment to the extent of Rs.2 Crores had been made.
c. Further, vide letter dated 26.12.2018, it was submitted that Shri. S.V. Ranga Reddy on receipt of amount to the extent of Rs. l Crore by Venkatshiva from M/s. SVRC on 27.05.2010 & 21.12.2010, had given Rs. l Crore directly to the seller. However, on 28.12.2018, it was submitted that the aggregate sum of Rs.1,40,00,000/- shown by the assessee as part of the purchase consideration, had been paid by the assessee’s husband, Mr. S.V. Ranga Reddy directly to the seller Mr. D.S. Reddy and the same had been reflected in his books of accounts and had figured in the Returns of income filed by him for the AYs.2011-12 and 2012-13. The assessee also submitted financials as on 31.03.2010 and 31.03.2011 in respect of Mr. S.V. Ranga Reddy. However, on perusal of above financials furnished for the FYs.2010-11 and 2011-12, it is seen that there was no whisper about M/s. Venkatshiva Engineering Works(JV). Hence the claim of the assessee that receipt of Rs. lcrore by M/s. Venkatshiva Engineering Works(JV) from M/s. SVRC is the source for the loan given by Shri. S.V. Ranga Reddy is not a bona fide one and liable to be rejected.
d. source for loan to the extent of Rs.40 lakhs given by Mr. S.V. Ranga Reddy to the assessee explained as money received from Shri. O.P. Kripalani . There was no material evidence produced by the assessee in support of the above claim except furnishing bank statements. 0Thus the assessee had not discharged burden as regards source from which investment to the extent of Rs.l.40 Crores had been made.
13. In view of the above foregoing, the reply of the assessee is not acceptable. The Act of assessee by furnishing copy of work orders of the partnership firms is clearly an afterthought with a motive to avoid payment of taxes which are lawfully due to the Government.
Just because the transactions are made through banking channels, it could not be treated as genuine one. The Hon’ble Apex Court in the case of CIT vs. P. Mohanakala 291 ITR 278 (2007) supports the case of revenue, wherein it is held that the transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. Merely because the assessee has furnished bank statements does not mean that the assessee has discharged his burden of proving the money obtained from Shri. S.V. Ranga Reddy, M/s. SVR Construction and M/s. Vinayak Infra and that too without providing source from where the money was given by them towards purchase of property made by her during the instant assessment year. Creditworthiness of Donors is not proved by the assessee. Thus totality of facts clearly indicate that the investment made by the assessee towards purchase of property, represented unaccounted income of the assessee, as the same was not disclosed by her in the returns of income. Onus is on the assessee to prove the source of amounts and merely by furnishing copy of bank statements does not shift the onus to the Department.
Assessee had not discharged burden as regards source from which investment had been made. Since no plausible explanation has been furnished about the investment in the purchase of immovable property and stands clearly establishes that the investment in the property has been made by the assessee herself which was nothing but clearly the undisclosed source and accordingly the addition under section 69 to the extent of Rs.3,40,00,0007- is made as unexplained investment and the same is added back to the returned income of the assessee for the AY.2013-14 as under.
Accordingly, the assessment is completed as under:
