2024 (1) TMI 843 - AT - Income Tax

ITAT deletes section 69 addition for unexplained investment due to revenue's failure to provide corroborative evidence

ITAT Jaipur allowed the assessee's appeal and deleted the addition made under section 69 for unexplained investment. The tribunal held that when CIT(A) ... Addition u/s 69 - unexplained investment - investment not recorded in the books of accounts and taxed the same as Income u/s 115BBE - Burden to prove - HELD THAT:- When the applicability of provision of section 69 was not accepted by the ld. CIT (A), then in that eventuality the normal business income cannot be taxed by the revenue without bringing on record the independent corroborative evidences in support of the addition. In this regard our attention was drawn to the decision of Naresh Khatter HUF [2003 (1) TMI 77 - DELHI HIGH COURT] wherein it was categorically held that burden to establish that an investment has been made, onus is on the revenue. As we find that in the facts of the present case the revenue has not brought anything on record either direct, indirect or indirect corroborative evidence in support of the additions made by them. Thus, we are of the view that when no evidence has been brought on record to substantiate the allegation that the investment is from unexplained sources and rather as per the assessment order passed by the AO, the same has been considered as an expenditure. Therefore, no addition could have been made in the absence of an independent, corroborative evidence. Even otherwise, as held by Hon’ble Delhi High Court (supra) that section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. We, therefore, find no force in the order of the ld. CIT (A) and the same is quashed. The addition is deleted. Appeal of the assessee is allowed. Issues Involved:1. Sustaining additions under section 69 for alleged investment.2. Approval under section 153D being mechanical and without application of mind.3. Charging of interest under section 234B.4. Penalty proceedings under section 271AAC.Summary:Issue 1: Sustaining Additions under Section 69The assessee contested the addition of Rs. 13,00,000/- made by the AO under section 69 for alleged unexplained investment, arguing that the amount was part of business planning and not an unrecorded investment. The assessee provided detailed explanations and ledger accounts to support that the amounts were either recorded or estimated funds. The Tribunal noted that the AO incorrectly applied section 69 and failed to bring any direct or corroborative evidence to substantiate the allegation of unexplained investment. The Tribunal, citing the Delhi High Court's decision in CIT vs. Naresh Khatter HUF, held that the burden of proof was on the revenue, which was not met. Consequently, the addition was deleted.Issue 2: Approval under Section 153DThe assessee argued that the approval given by the Addl. CIT under section 153D was mechanical and without application of mind. The Tribunal referenced the ITAT Jodhpur Bench decision in Indra Bansal & Ors. vs. ACIT, supporting the view that such approvals must be in accordance with the law and not mechanical. The Tribunal found merit in the assessee's argument and noted the procedural lapse.Issue 3: Charging of Interest under Section 234BThe assessee contended that interest should be charged only on the returned income. The Tribunal did not provide specific details on this issue but implicitly accepted the assessee's contention by allowing the appeal.Issue 4: Penalty Proceedings under Section 271AACThe assessee argued that no penalty should be attracted given the facts of the case. The Tribunal agreed with the assessee, noting that the penalty provisions were not applicable under the circumstances.Conclusion:The Tribunal allowed the assessee's appeal, quashing the order of the CIT (A) and deleting the addition of Rs. 13,00,000/-. The Tribunal emphasized the need for the revenue to provide corroborative evidence when making additions under section 69 and highlighted procedural requirements for approvals under section 153D.