2025 (2) TMI 578 - AT - Income Tax

Revenue's appeal dismissed on unexplained money under section 69A after assessee provided detailed property acquisition evidence during remand proceedings

DCIT, Central Circle-26, New Delhi Versus Sham Lal And (Vice-Versa)

DCIT, Central Circle-26, New Delhi Versus Sham Lal And (Vice-Versa) - TMI ISSUES PRESENTED and CONSIDEREDThe primary issues considered in this judgment are:1. Whether the deletion of the addition of INR 63,00,000/- under Section 69A of the Income Tax Act, 1961, by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified.2. Whether the deletion of the addition of INR 12,90,00,000/- under Section 69A as unexplained investment was appropriate.3. Whether the CIT(A) erred in confirming the addition of INR 17,65,000/- made by the Assessing Officer (AO) on account of alleged unexplained cash deposits in the bank account.4. Whether the denial of the short-term capital loss of INR 21,00,000/- on the sale of property was valid.ISSUE-WISE DETAILED ANALYSIS1. Deletion of Addition of INR 63,00,000/- under Section 69ARelevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, requiring the taxpayer to provide a satisfactory explanation for the source of any money found.Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) had considered the facts that the property was sold for INR 63,00,000/-, which was acquired for INR 84,00,000/-, resulting in a loss of INR 21,00,000/-. The AO had not provided a contrary view during remand proceedings.Key Evidence and Findings: The assessee provided evidence of the acquisition and sale of the property, demonstrating the genuineness of the transaction.Application of Law to Facts: The Tribunal found that the CIT(A) rightly deleted the addition as the transaction was genuine and supported by evidence.Conclusions: The Tribunal dismissed the Revenue's ground, affirming the CIT(A)'s decision to delete the addition.2. Deletion of Addition of INR 12,90,00,000/- under Section 69ARelevant Legal Framework and Precedents: Section 69A requires taxpayers to explain the source of investments to avoid being treated as unexplained.Court's Interpretation and Reasoning: The Tribunal considered the Remand Report, which confirmed that the assessee and his brother acquired 20% of the property, and the brother's share was paid from his own sources.Key Evidence and Findings: The Tribunal noted that the assessee substantiated the source of investment through banking channels and necessary documentation.Application of Law to Facts: The Tribunal found the CIT(A) correctly deleted the addition, as the assessee's investment was from explained sources.Treatment of Competing Arguments: The Tribunal addressed the Revenue's contention regarding unexplained sources and stamp duty payment, sending the latter issue back to the AO for verification.Conclusions: The Tribunal partly allowed the Revenue's ground for statistical purposes, remanding the stamp duty issue.3. Addition of INR 17,65,000/- for Unexplained Cash DepositsRelevant Legal Framework and Precedents: The scope of limited scrutiny must align with the reasons for selection, and additions outside this scope require proper procedure.Court's Interpretation and Reasoning: The Tribunal found the AO exceeded jurisdiction by examining cash deposits not covered under limited scrutiny.Key Evidence and Findings: The assessee provided a cash flow statement showing sufficient cash balance for deposits.Application of Law to Facts: The Tribunal concluded that the AO's addition was beyond jurisdiction and unsupported by evidence.Conclusions: The Tribunal deleted the addition of INR 17,65,000/-.4. Denial of Short-Term Capital Loss of INR 21,00,000/-Relevant Legal Framework and Precedents: Section 80 of the Income Tax Act requires claims to be made in the return of income for them to be considered.Court's Interpretation and Reasoning: The Tribunal noted that the loss was not claimed in the return, and thus, could not be allowed to be carried forward.Conclusions: The Tribunal upheld the CIT(A)'s decision to deny the claim.SIGNIFICANT HOLDINGSCore Principles Established:1. Additions under Section 69A require substantiation of unexplained money or investments, with a proper explanation and evidence.2. The scope of limited scrutiny must be adhered to, and any expansion requires following due procedures.Final Determinations:1. The deletion of the addition of INR 63,00,000/- was affirmed.2. The deletion of the addition of INR 12,90,00,000/- was partly affirmed, with remand for verification of stamp duty payment.3. The addition of INR 17,65,000/- was deleted.4. The denial of the short-term capital loss of INR 21,00,000/- was upheld.