2024 (11) TMI 958 - AT - Income Tax

Assessee's appeal allowed, Section 69 additions deleted for unexplained investments with legitimate cash accumulation explanation accepted.

Brijesh Kumar S/o, Sh. Virendra Singh Versus ITO Ward-1 (2), Muzaffarnagar, Uttar Pradesh

ITAT Delhi allowed the assessee's appeal and deleted additions made under Section 69 for unexplained investments. The tribunal found that the assessee, ... Unexplained investment u/s 69 from the Assessee's business capital - Assessee has withdrawn capital from the business of the Assessee who was engaged in the business of Straw (Bhus) for long time and the Assessee has shown income u/s 44AD - HELD THAT:- Assessee has shown the income u/s 44AD of the Act and in the year under consideration and the Assessee has shown turnover of Rs. 18,35,000/- and declared the income of Rs. 2,50,000/- from the aforesaid business which has been accepted by the AO. The explanation given by the Assessee was that out of the withdrawn of his capital, the investment has been made. To substantiate the same, the Assessee has produced capital account and also statement of affairs which has not been considered by the lower authorities. Since, the Assessee has done the business in cash, it cannot be ruled out the availability of cash with the Assessee. Though, the Assessee has shown turnover of Rs. 18,35,000/-, CIT(A) observed that Assessee has marginal income. We are of the opinion that there is every chance of accumulation of cash from the earlier years, therefore, Assessee having availability of cash in hand which can be corroborated with capital account and statement of affairs for three years. Thus relying on the order of case of Mansukh K. Vaghasia [2022 (4) TMI 848 - ITAT SURAT] we delete the addition made u/s 69 of the Act. Addition on account of unexplained investment u/s 69 - Assessee contended that the said amount was invested by the wife of the Assessee and the same has been added in her hand by the AO u/s 143(3) substantially and made the present addition on protective basis in the hand of the Assessee - Assessee further submitted that the addition made in the hand of the wife of the Assessee has been accepted and the tax has been duly paid by the wife of the Assessee - HELD THAT:- As the substantial addition made in the hand of the Assessee’s wife has been claimed to have been accepted and due tax has been paid, the protective addition made in the hand of the Assessee does not survive. Accordingly, the protective addition made in the hand of the Assessee on protective basis is hereby deleted. Appeal of the Assessee is allowed. Issues Involved:1. Whether the investment made by the Assessee in the property was unexplained under Section 69 of the Income Tax Act.2. Whether the addition of Rs. 20,50,000/- as unexplained investment from the Assessee's business capital was justified.3. Whether the addition of Rs. 12,00,000/- as unexplained investment from the capital of the Assessee's wife was justified.Issue-wise Detailed Analysis:1. Unexplained Investment Under Section 69:The primary issue was whether the investment made by the Assessee in the property was unexplained under Section 69 of the Income Tax Act. The Assessing Officer (AO) had made an addition of Rs. 86,20,000/- as unexplained investment, which was later reduced by the Commissioner of Income Tax (Appeals) [CIT(A)] to Rs. 32,50,000/-. The Assessee contended that the investment was explained through documented sources, including funds received from the Assessee's father and bank loans. The Tribunal examined the Assessee's claims, including the explanation of funds received through drafts and the capital accounts of the Assessee and his wife, ultimately finding merit in the Assessee's explanations and deleting the addition.2. Addition of Rs. 20,50,000/- as Unexplained Investment:The Assessee argued that the amount of Rs. 20,50,000/- was withdrawn from the business capital of trading Straw (Bhus) and was available in cash for investment. The Assessee showed income under Section 44AD of the Act, with a turnover of Rs. 18,35,000/- and declared income of Rs. 2,50,000/-, which was accepted by the AO. The Tribunal noted that the Assessee had conducted business in cash and presented capital accounts and statements of affairs to substantiate the availability of cash. Citing a precedent from the Surat Bench in Mansukh K. Vaghasia vs. ITO, the Tribunal found that the Assessee's explanation was plausible and deleted the addition of Rs. 20,50,000/-.3. Addition of Rs. 12,00,000/- as Unexplained Investment from Assessee's Wife:The Assessee contended that the Rs. 12,00,000/- was invested by his wife, Smt. Munesh Devi, and had already been added to her income by the AO. The addition in the Assessee's hands was made on a protective basis. The Tribunal observed that the substantial addition had been accepted in the wife's assessment, and taxes were duly paid. Therefore, the protective addition in the Assessee's hands was deemed unnecessary and was deleted.Conclusion:The Tribunal allowed the appeal of the Assessee by deleting the additions of Rs. 20,50,000/- and Rs. 12,00,000/- made under Section 69 of the Income Tax Act. The Tribunal found that the Assessee had adequately explained the sources of the investment and that the protective addition in the Assessee's hands was unjustified. The order was pronounced in open court on 18th November 2024.