2014 (2) TMI 432 - AT - Income Tax

Tribunal Rules in Favor of Assessee, Rejects Unexplained Investment Addition

Harshadbhai Mangalbhai Patel, Matruda Versus The ITO, Ward-3(1), Baroda

The Tribunal allowed both appeals by the Assessee, ruling that the addition of Rs. 30,00,000 as unexplained investment under Section 69B was not ... Addition made u/s 69B of the Act – Investment in mutual fund – Unexplained investment – Held that:- The decision in Krinaben Patel [2014 (2) TMI 416 - ITAT AHMEDABAD] followed - 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 Involved:1. Addition of Rs. 30,00,000 as unexplained investment under Section 69B.2. Applicability of the decision in the case of Krinaben K Patel to the present case.Detailed Analysis:Issue 1: Addition of Rs. 30,00,000 as Unexplained Investment Under Section 69BThe Assessee, an architect and partner in M/s Designed Associates, filed a return for AY 2008-09, which was reopened under Section 147. The assessment determined a total income of Rs. 32,52,920 after adding Rs. 30,00,000 as unexplained investment under Section 69B. The Assessee claimed that the Rs. 30,00,000 invested in mutual funds was refunded by Rudra Developers Pvt. Ltd., a family concern, after a legal settlement over land purchased from 1987 to 1998. The AO rejected this explanation, noting the absence of such investments in Rudra Developers' balance sheet and the lack of evidence of the Assessee's capacity to accumulate Rs. 30,00,000. The CIT(A) upheld the AO's decision, emphasizing that the transactions appeared to be accommodation entries and lacked credibility. The CIT(A) referenced the Supreme Court's decision in Sumati Dayal Vs CIT and other cases to support the conclusion that the Assessee's explanation was not believable.Issue 2: Applicability of the Decision in the Case of Krinaben K PatelThe Assessee argued that the facts of the present case were identical to those in the case of Krinaben K Patel, where the ITAT had ruled in favor of the Assessee. In Krinaben K Patel's case, the Tribunal accepted the explanation that the Rs. 30,00,000 received from Rudra Developers was a legitimate refund, supported by bank statements and a compromise order from the Additional Senior Civil Judge of Vadodara. The Tribunal found no reason to doubt the genuineness of the transaction, despite the familial relationship between the Assessee and the directors of Rudra Developers.Tribunal's Decision:The Tribunal agreed with the Assessee's argument, noting that the Revenue had not provided any material to distinguish the present case from that of Krinaben K Patel. The Tribunal followed the earlier decision, finding that the Assessee had satisfactorily explained the source of the investment in mutual funds. Consequently, the Tribunal deleted the addition of Rs. 30,00,000 made by the AO under Section 69B.Conclusion:Both appeals by the Assessee were allowed, with the Tribunal ruling that the addition of Rs. 30,00,000 as unexplained investment under Section 69B was not justified, following the precedent set in the case of Krinaben K Patel. The order was pronounced in open court on 07-02-2014.