Invocation of deeming provisions of section 69 unjustified as nature and source of undisclosed income explained: ITAT Chandigarh

Aniljit Singh Arora Vs DCIT (ITAT Chandigarh)

ITAT Chandigarh held that addition invoking the deeming provisions of section 69 r.w.s. 115BBE of the Income Tax Act unjustified as nature and source of undisclosed income/ investment duly explained by the assessee.

Facts- During the course of survey, AO made addition towards unexplained investment u/s. 69 being short fall in the value of investment in the building declared by the assessee. Further, referring to the surrender letter, AO also made addition towards unexplained investment u/s. 69 r.w.s 115BBE of the Act on account of understated expenditure involved in construction of the hospital building.

CIT(A) upheld the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- Held that the nature and source of such unaccounted investment in the hospital building is arising out of assessee’s unaccounted professional receipts for the year under consideration. No doubt, these transactions were not fully recorded in the books of accounts at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, we find that based on appreciation of assessee’s statement, the corroborative material and other attending circumstances available on record, the assessee has provided a reasonable and acceptable explanation about the nature and source of such unrecorded transactions as that of professional receipts and the necessary nexus with assessee’s profession has been established, it cannot be said that these are unexplained transactions, thus, doesn’t satisfy the second condition for invoking the deeming provisions of Section 69 of the Act. Therefore, we are of the considered view that there was no justifiable basis on the part of the AO in applying the provisions of Section 69 r/w Section 115BBE of the Act to the surrendered business income of the assessee which has been duly offered in the return of income.

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