2014 (2) TMI 416 - AT - Income Tax

Appellate Tribunal rules in favor of assessee, deleting unexplained investment addition

Krinaben Kirankumar Patel Versus ITO

The Appellate Tribunal ITAT Ahmedabad ruled in favor of the assessee in a case concerning the addition of Rs.30,00,000 as an unexplained investment in ... Addition made u/s 69B of the Act – Investment in mutual fund – Unexplained investment – Held that:- The addition has been made only for the sake of addition - The assessee had litigation and between the litigants a compromise order - The assessee has also filed the copy of the bank account of 'RDPL' wherein the amount in question of Rs. 30 lakhs has been debited to their account with Bank of Baroda on 05.12.2006 - Merely because the assessee's father was a director in 'RDPL' along with some other family members is no ground to make addition of the amount, sources of which has been wholly explained by the assessee – the CIT(A) has not given any cogent reason for upholding the addition made under section 69B by the A.O - the assessee has satisfactorily explained the source of credit entries in its bank account and the investment by her in the mutual fund with Standard Chartered Bank – thus, no case of addition under section 69B as undisclosed investment could be made out by the department and the addition made is accordingly deleted – Decided in favour of Assessee. Issues:1. Addition of Rs.30,00,000 as unexplained investment in Mutual Fund.2. Timing of the credit in the bank account and its relevance to the assessment year.Issue 1: Addition of Rs.30,00,000 as unexplained investment in Mutual Fund:The appeal contested the addition of Rs.30,00,000 in Mutual Fund by the CIT(A) under Section 69B, arguing that the source of the investment was explained. The assessee maintained that the amount was returned by M/s. Rudra Developers and then invested in Standard Chartered Bank's mutual fund. The counsel emphasized that the source of the deposits was clarified, meeting the requirements of the Income Tax Act. The Departmental Representative (DR) countered, alleging that the amount was accumulated without evidence and not reflected in RDPL's balance sheet. The Tribunal examined the documents and noted a compromise order in a civil suit, the credit in the bank account from RDPL, subsequent investments, and related party disclosures. The Tribunal concluded that the addition lacked substance as the source of the funds was adequately explained by the assessee, leading to the deletion of the addition under Section 69B.Issue 2: Timing of the credit in the bank account and its relevance to the assessment year:The Tribunal scrutinized the timeline of events, highlighting the credit of Rs.30,00,000 in the bank account on 5.12.2006, pertaining to A.Y. 2007-2008, not 2008-2009. The amount was then invested in mutual funds on the same day and subsequently encashed and reinvested. The Tribunal emphasized that the father's directorship in RDPL did not justify the addition, especially when the source of the funds was well-documented. The Tribunal found the CIT(A) lacking in providing substantial reasons for upholding the addition under Section 69B. The Tribunal's analysis led to the deletion of the addition, as the assessee satisfactorily explained the source of credit entries and investments, resulting in the allowance of the appeal.In summary, the judgment by the Appellate Tribunal ITAT Ahmedabad addressed the issues of unexplained investment in Mutual Fund and the timing of the credit in the bank account concerning the assessment year. The Tribunal ruled in favor of the assessee, highlighting the adequate explanation provided for the source of funds and investments, leading to the deletion of the addition under Section 69B. The detailed examination of documents and events supported the Tribunal's decision to allow the appeal.