2025 (2) TMI 39 - AT - Income Tax

Unexplained investment addition under section 69 deleted when payments made through banking channels with complete documentation

Smt. Kajari Banerjee Versus ITO, Ward-29 (1), Kolkata

ITAT Kolkata allowed the appeal, deleting additions made under sections 69 and 56(2)(x). The tribunal found that unexplained investment addition under ... Addition on account of unexplained investments u/s 69 - HELD THAT:- All payments were made through banking channel right from the F.Y. 2012-13 to A.Y. 2018-19. Therefore, conclusion drawn by the ld. AO is against the facts on record available in the assessment folder as all the materials were before the AO. CIT (A) has not appreciated these facts correctly and simply confirmed the addition made by the ld. AO. We note that the AO has wrongly made the addition and similar ld. CIT (A) affirmed the same. Addition u/s 56(2)(x) - difference between the stamp valuation and set forth value - HELD THAT:- The first payment of the flat was made on 12th June, 2012 and all the payments were completed till the F.Y. 2018-19. So far as the observation of the AO is concerned that the difference between the purchase consideration and the value as per stamp valuation authority is to be taxed at 56(2)(x), we note that the provisions of clause (x) of sub section (2) of sub section 56 were inserted by Finance Act 2017, with effect from 01.04.2017 and was not applicable because this flat was brought prior to that. As per the first proviso to section 56(2)(x), it is stated that when the date of agreement fixing the amount for transfer of immovable property and the date of registration are not same. The stamp valuation on the date of registration may be taken for the purpose of this sub clause but in any case, the insertion of this clause was made by the Finance Act, 2017 and was not applicable when the flat was bought. So far as the provisions of Section 56(2)(vii)(b) of the Act are concerned, the clause b was inserted by finance act 2015 with effect from 01.04.2014, which provides that in case consideration which is less than the stamp value of the property by an amount exceeding 50,000/- than the stamp value of such property as exceeded amount shall be added to the income of the assessee. The proviso provides that the stamp value of the property on the date of agreement may be taken for the purpose of this consideration. Even this clause does not apply to the assessee as this is applicable for A.Y. 2014-15 and therefore, these provisions are not applicable to the present transaction which was agreed to in A.Y. 2013-14. We also note that this new charging section brought under statute book is applicable prospectively not retrospectively.Decided in favour of assessee. ISSUES PRESENTED AND CONSIDEREDThe primary issues considered in this judgment are:1. Whether the addition of 19 lacs made by the Assessing Officer (AO) under Section 69 of the Income Tax Act for unexplained investments was justified.2. Whether the addition of 44,78,336/- under Section 56(2)(x) of the Income Tax Act, due to the difference between the stamp valuation and the purchase price of the property, was correctly upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].ISSUE-WISE DETAILED ANALYSIS1. Addition under Section 69 for Unexplained InvestmentsRelevant Legal Framework and Precedents: Section 69 of the Income Tax Act deals with unexplained investments, where if an assessee has made investments which are not recorded in the books of account and the assessee offers no explanation about the nature and source of the investments, the value of the investments may be deemed to be the income of the assessee.Court's Interpretation and Reasoning: The Tribunal noted that the investment in the property was made in an earlier financial year and was duly reflected in the balance sheet of the assessee. The payments for the purchase were made through banking channels from the financial year 2012-13 to 2018-19, which was not considered by the AO.Key Evidence and Findings: The investment was shown in the balance sheet as of 31.03.2020, and the payments were supported by the sale deed dated 30.04.2019 and the agreement attached in the records.Application of Law to Facts: The Tribunal applied Section 69 and found that the AO's conclusion was contrary to the facts on record, as the investment was explained and documented.Treatment of Competing Arguments: The Tribunal found that both the AO and CIT(A) failed to appreciate the documented evidence, leading to an erroneous addition.Conclusions: The Tribunal set aside the order of CIT(A) and directed the AO to delete the addition of 19 lacs.2. Addition under Section 56(2)(x) for Difference in Stamp ValuationRelevant Legal Framework and Precedents: Section 56(2)(x) of the Income Tax Act deals with taxation of the difference between the stamp duty value and the purchase price of immovable property received for inadequate consideration. The provision was inserted by the Finance Act, 2017, effective from 01.04.2017.Court's Interpretation and Reasoning: The Tribunal observed that the property was purchased in an earlier year, and the payments were completed before the applicability of Section 56(2)(x). The Tribunal relied on the proviso to Section 56(2)(x), which considers the stamp duty value on the date of the agreement if part of the consideration is paid by specified modes before the date of the agreement.Key Evidence and Findings: The Tribunal noted that the payments were made starting from 12th June 2012, and the transaction was agreed upon before the applicability of the amended provisions.Application of Law to Facts: The Tribunal applied the proviso to Section 56(2)(x) and found that the addition was not sustainable as the transaction predated the effective date of the provision.Treatment of Competing Arguments: The Tribunal considered the decision in Pinki Chetan Shah Vs. Addl. ACIT, which supported the view that the proviso to Section 56(2)(x) should apply, allowing the consideration of stamp duty value on the agreement date.Conclusions: The Tribunal set aside the order of CIT(A) and directed the AO to delete the addition of 44,78,336/-.SIGNIFICANT HOLDINGSCore Principles Established: The Tribunal emphasized the importance of considering documented evidence and the timing of transactions in relation to the applicability of tax provisions.Final Determinations on Each Issue: The Tribunal allowed the appeal of the assessee, directing the deletion of additions under both Section 69 and Section 56(2)(x) of the Income Tax Act.