Swastik Developers Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad deletes additions for unexplained investment & partner’s capital in construction firm’s case
Ahmedabad ITAT has granted complete relief to a construction partnership firm by deleting additions made under Sections 69A & 68 on account of purchase & partners’ capital contribution.
Assessee had purchased l& for Rs 2.75 crore & AO, in reassessment proceedings, treated Rs 2,91,23,300 as unexplained investment u/s 69A (including stamp duty & registration) & Rs 1,37,40,714 as unexplained cash credits u/s 68, alleging that partners had low incomes & their capital contributions were unexplained. CIT(A) upheld the additions, holding that the firm failed to prove the genuineness & creditworthiness of the partners.
The primary issues involved in the appeal before Tribunal are :
(i) whether the addition of Rs.2,91,23,300/- made u/s 69A on account of alleged unexplained investment in l& is sustainable in the hands of the firm, &
(ii) whether the addition of Rs.1,37,40,714/- made u/s 68 in respect of capital introduced by the partners is legally tenable.
Tribunal noted that Assessee firm was constituted during the financial year 2015–16 & had entered into a registered purchase agreement for immovable property with the total purchase consideration amounting to Rs.2.75 crore. Additionally, stamp duty & registration charges aggregating to Rs.16,73,300/- were incurred, resulting in total investment of Rs.2,91,23,300/-. Out of the total purchase price, Rs.2,02,00,000/- was paid in F.Y. 2015–16 & Rs.89,23,300/- in F.Y. 2016–17. However, the addition u/s 69A has been made for the entire amount of Rs.2.91 crore in A.Y. 2017–18, ignoring the fact that only Rs.89,23,300/- was actually paid during the relevant previous year. Tribunal opined that this approach suffers from a fundamental fallacy. The addition u/s 69A must relate to the investment or expenditure actually incurred during the year under assessment. It is a well-settled principle that no addition can be made u/s 69A for an amount not representing an investment made during the relevant previous year.
