Shoukat Mohd. Khan Vs ITO (ITAT Indore)
The Indore Bench of the Income Tax Appellate Tribunal (ITAT) has allowed an appeal filed by Shoukat Mohd. Khan against an order of the Commissioner of Income-Tax (Appeals)-3, Bhopal [“CIT(A)”]. The CIT(A)’s order had partly upheld an assessment order passed by the Income Tax Officer-4(2), Bhopal [“AO”] under Section 144 of the Income-tax Act, 1961 [“the Act”] for the Assessment Year 2012-13, which included an addition of Rs. 70,13,980/- as unexplained investment in a residential property.
The case arose when the assessee, an individual, filed his return of income declaring a total income of Rs. 1,740/-. The assessment was reopened for scrutiny, but the assessee did not comply with the notices issued. Consequently, the AO made a best judgment assessment under Section 144, making two primary additions: (i) Rs. 1,20,47,000/- under Section 69 for unexplained investment in a residential house in Bhopal, and (ii) denial of exemption of Rs. 38,41,924/- claimed under Sections 54/54F against long-term capital gain from the sale of another property. In the first appeal, the CIT(A) partly allowed the assessee’s appeal by accepting an explainable source of Rs. 60,00,000/- towards the property investment and allowing the exemption claimed under Sections 54/54F. However, the CIT(A) confirmed the remaining addition of Rs. 70,13,980/-, leading to the present appeal before the ITAT.
The assessee challenged the confirmed addition, contending that the CIT(A) erred in not accepting the sources of the investment. The ITAT focused on the merit of the addition, specifically examining two sources of funds that the CIT(A) had not accepted: (i) a loan of Rs. 80,00,000/- from the assessee’s brother, Mr. Zafar Mohd. Khan, and (ii) a direct payment of Rs. 23,00,000/- made by the assessee’s wife, Mrs. Shama Mohd., towards the property.
Regarding the loan from Mr. Zafar Mohd. Khan, the ITAT noted that the assessee had received Rs. 80,00,000/- through RTGS from his brother’s State Bank of India account. An affidavit from Mr. Zafar was provided, stating the loan was given out of natural love and affection. While the CIT(A) had rejected this due to the non-furnishing of Mr. Zafar’s Income Tax Return (ITR) and bank account details, the ITAT observed that the PAN of Mr. Zafar was mentioned in the affidavit, and the assessee subsequently filed a copy of Mr. Zafar’s ITR showing his mining business. Furthermore, the assessee produced Mr. Zafar’s bank statement, which clearly showed debit entries corresponding to the loan amounts remitted to the assessee via RTGS. The bank account was an overdraft account, and the loans were extended using this facility. The ITAT concluded that the identity and creditworthiness of the creditor and the genuineness of the transaction were established, satisfying the requirements of Section 68 of the Act.
Concerning the direct payment of Rs. 23,00,000/- by Mrs. Shama Mohd., the ITAT pointed out that the property was jointly purchased by the assessee and his wife, with both names appearing as purchasers in the registered deed. Mrs. Shama Mohd. had made payments of Rs. 15,00,000/- to the seller and Rs. 8,00,000/- towards stamp charges through cheques from her bank account. An affidavit from Mrs. Shama Mohd. was also filed, along with the acknowledgement of the Rs. 15,00,000/- cheque in the registered deed. Despite this, the CIT(A) had rejected the submission due to the non-furnishing of Mrs. Shama Mohd.’s bank statement and ITR. However, the ITAT emphasized that Mrs. Shama Mohd.’s PAN was on record, the payments were made through cheques, and importantly, she was a joint owner of the property. In such a scenario, payments made by a joint owner towards the purchase of the property through banking channels and supported by an affidavit could not be treated as unexplained investment in the hands of the assessee.
Based on these findings, the ITAT held that both sources of investment in the property were sufficiently explained. Consequently, the tribunal deleted the addition of Rs. 70,13,980/- upheld by the CIT(A), allowing the assessee’s appeal on the merit of the addition. As both parties had agreed that if the ground related to the merit of the addition was allowed, the ground challenging the jurisdiction of the AO would not need adjudication, the ITAT kept the jurisdictional ground open and undecided. Ultimately, the appeal was allowed in favor of the assessee.
FULL TEXT OF THE ORDER OF ITAT INDORE
