Syedali Ebrahim Vs ITO (ITAT Cochin)
Cochin ITAT Restores 68 Addition on Capital Account to AO for Fresh Verification- Transfer from Housing Loan to Capital Account Needs Deeper Scrutiny
Assessee challenged the order of CIT(A)/NFAC dated 19.06.2025 which had upheld additions made by AO in scrutiny assessment u/s 143(3). AO assessed income at ₹1,15,31,681 as against returned income of ₹16,04,380, mainly by (a) treating ₹97,27,301 credited in capital account as unexplained u/s 68, & (b) disallowing ₹2,00,000 claimed as loss from self-occupied property.
Assessee submitted that the increase in capital account was not fresh capital but merely transfer entries from housing loan account & personal account, duly reflected in audited financials. It was explained that loan was taken from Federal Bank in 2012 for construction of house, additions to fixed assets were recorded in FY 2013-14, & subsequently, in FY 2015-16, the outstanding housing loan balance was transferred to capital account. Bank statements & ledgers were produced to substantiate the claim. AO however held that Assessee failed to establish cash flow & did not furnish underlying loan agreement or complete records. CIT(A) confirmed addition.
Tribunal noted that relevant documents such as financial statements, housing loan ledger & bank statements were produced, but loan agreement & further corroboration were still pending. Since Assessee undertook to furnish full documents, Tribunal found merit in restoring the matter for fresh verification. It accordingly set aside AO’s order on the capital account issue & remanded to AO for de novo adjudication after giving reasonable opportunity. Assessee was directed to produce all relevant agreements & evidences. As regards other grounds relating to housing loan interest deduction, these were not pressed by Assessee at hearing & hence dismissed.
