2014 (10) TMI 218 - AT - Income Tax

Tribunal upholds unexplained investment, Revenue appeal allowed for further examination.

Smt. Sharma Tyagi Versus ITO, Ward 1(1), Muzzaffarnagar

The Tribunal upheld the addition of Rs. 1,35,000 as unexplained investment under Section 69 of the Income Tax Act, dismissing the assessee's appeal. The ... Unexplained investment u/s 69 – Held that:- The AO made addition by holding that the assessee had neither furnished returns of income for the preceding years nor any details and evidences regarding past savings were furnished by the assessee - CIT(A) has rightly confirmed the addition by holding that average yearly withdrawal from bank during February 2000 to March 2005 comes to ₹ 1,41,800/-, thus entire pension income and other funds were consumed by the assessee during the earlier 5 years and there was a balance of ₹ 1,209/- only as on 31st March, 2005 - the pattern of withdrawal shows that the assessee was solely depended on the pension income and the moment pension income was credited to her bank account, the same was withdrawn in small amounts reflecting the actual consumption rather than the savings - had there been any surplus funds or savings, the same could have been in the form of bank deposits or FDRs but nothing of this kind of evidence was available with the assessee, therefore, it could not be believed that the assessee collected a sum of ₹ 1,35,000/- from her past savings during preceding period of 5 years. The assessee had not furnished details of withdrawals for household expenses neither during the assessment proceedings nor during the appellate proceedings, therefore, considering the old age of the assessee and other relevant factors like medical expenses etc. it can safely, be hold that the receipts from family pension as well as agricultural income were consumed by the assessee on household expenses and other day to day livelihood needs - it cannot be accepted that the assessee was actually in a position to accumulate savings from family pension and agricultural income - Therefore, the source of income of ₹ 1,35,000/- remained unexplained and the AO was fully justified in making addition to the assessee’s income u/s 69 of the Act – Decided against assessee. Advance receipt for sale of plots – Income treated as income from other sources - Nexus between the date of purchase of new property and the amount received by the assessee as advance - Held that:- Assessee purchased land from Smt. Subhadra Tyagi wife of Dr. S.C. Tyagi on 18.11.2005 and purchase price was ₹ 14,00,000 – all the sale deeds have been executed by the assessee after execution of sale deed in her favour (the assessee) i.e. after 18.11.2005 - In all the sale deeds executed by the assessee (seller) in favour of the purchasers it has been stipulated that the assessee (seller) has received sale consideration before respective witnesses, but the detail and date of receipt has not been clearly mentioned - there are some credit entries in their saving bank account reflecting some receipts but in absence of relevant detail of depositor and other documents such as cheque, demand draft or pay order, it cannot be ascertained that the amount so credited in the account of Dr. S.C. Tyagi and Smt. Subhadra Tyagi has been made by either the assessee or on the direction of the assessee by the said purchasers of plots - there was regular withdrawals of money ranging between ₹ 1,000/- to ₹ 15,000/- but during the financial year 2005 there is major withdrawal and the assessee has not submitted - the authorities below have not properly examined the claim and the submissions of the assessee that the assessee made investment of ₹ 12,50,000/- out of advance amount received from various purchasers as an advance which was directly deposited to the account of seller of the land to the assessee i.e. Smt. Subhadra Tyagi and her husband Dr. S.C. Tyagi – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue. Issues Involved:1. Addition of Rs. 1,35,000/- as unexplained investment under Section 69 of the Income Tax Act.2. Deletion of addition of Rs. 12,50,000/- made by the Assessing Officer on account of income from other sources.Issue-wise Detailed Analysis:1. Addition of Rs. 1,35,000/- as Unexplained Investment under Section 69:The assessee contested the addition of Rs. 1,35,000/- made by the Assessing Officer (AO) as unexplained investment under Section 69 of the Income Tax Act. The assessee argued that the amount represented savings from family pension and agricultural income, which were not taxable in previous years. The assessee provided evidence of withdrawals amounting to Rs. 7,09,000/- from her bank account over several years to justify the accumulation of savings.The AO, however, found the explanation unsatisfactory, noting that the assessee did not furnish returns of income for preceding years nor provided details and evidence of past savings. The AO's remand report reiterated these observations, leading the Commissioner of Income Tax (Appeals) [CIT(A)] to uphold the addition. The CIT(A) concluded that the pattern of withdrawals indicated consumption rather than savings, and there was no evidence of surplus funds in the form of bank deposits or fixed deposit receipts (FDRs).The Tribunal agreed with the CIT(A)'s findings, noting that the assessee failed to provide details of household expenses, and considering her age and potential medical expenses, it was unlikely she could accumulate such savings. Consequently, the Tribunal upheld the addition of Rs. 1,35,000/- as unexplained investment under Section 69.2. Deletion of Addition of Rs. 12,50,000/- as Income from Other Sources:The Revenue challenged the CIT(A)'s decision to delete the addition of Rs. 12,50,000/- made by the AO on account of income from other sources. The AO had added this amount, arguing that there was no nexus between the date of purchase of new property and the amount received by the assessee as advance.The assessee claimed that the amount represented an advance received from intended purchasers of plots, which was used to purchase land. The CIT(A) accepted the assessee's explanation, noting that the assessee provided affidavits from the purchasers and evidence of bank transactions supporting the claim. The CIT(A) observed that the word 'Peshtar' in the sale deeds meant 'advance received,' not instant payment, and the AO had misconstrued this term.The Tribunal, however, found that the authorities had not thoroughly examined the claim. The Tribunal noted discrepancies in the bank passbooks and the lack of clear evidence linking the advance payments to the purchase of land. Consequently, the Tribunal remitted the issue back to the AO for a detailed examination of the source of investment. The AO was directed to adjudicate the issue afresh, offering the assessee an opportunity to present evidence.Conclusion:The appeal of the assessee regarding the addition of Rs. 1,35,000/- was dismissed, upholding the CIT(A)'s decision. The appeal of the Revenue concerning the deletion of Rs. 12,50,000/- was allowed for statistical purposes, remitting the issue back to the AO for further examination. The order was pronounced in the open court on 30/09/2014.