2025 (3) TMI 654 - AT - Income Tax

Tribunal Overturns Unexplained Investment Addition of 41,21,145 Under Section 69; Evidence Deemed Sufficient by Assessee

The Tribunal ruled that the addition of 41,21,145 as unexplained investment under Section 69 of the Income Tax Act was unjustified. It found that the ... Addition u/s 69 - unexplained investment - addition on account of shortfall of profit as said short fall was computed by the AO by applying 8% on total turnover on presumptive basis u/s 44AD of the Act based on the deposits in the assessee bank account HELD THAT:- Assessee filed all the details comprising the bank statements of all these three banks with the ld. AO which has been dealt with by the ld. AO. The gross turnover of the assessee was shown at ₹ 39,48,887/- and the source of investment was out of receipts from business which were duly reported by the assessee in the ITR. During the year, the assessee has returned the income on presumptive basis at 8% on the total turnover u/s 44AD of the Act. Therefore, in our opinion, the addition made by the ld. AO u/s 69 of the Act is wrong and cannot be sustained as this is not unexplained investment u/s 69 of the Act. As undisputed that the payments were made from the bank accounts of the assessee which were before the ld. AO and even the ld. AO has extracted the details of the bank accounts at page no.5 and 6 of the assessment order. Therefore, no addition can be made u/s 69 of the Act. Pertinent to state that the ld. AO has not invoked the provisions of Section 56(2)(vii) - CIT (A) simply upheld the order on the ground that the assessee has failed to substantiate the sources of investment with supporting documents, however, we find that all these documents including bank statements of three banks were before the ld. Assessing Officer. Appeal of the assessee is allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment is whether the addition of 41,21,145/- as unexplained investment under Section 69 of the Income Tax Act, 1961, made by the Assessing Officer (AO) and subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], was justified.ISSUE-WISE DETAILED ANALYSIS1. Addition of 41,21,145/- as Unexplained Investment under Section 69Relevant Legal Framework and PrecedentsSection 69 of the Income Tax Act pertains to unexplained investments. According to this section, if an assessee has made investments not recorded in the books of account and fails to satisfactorily explain the nature and source of the investments to the AO, the value of such investments may be deemed as the income of the assessee for the financial year.Court's Interpretation and ReasoningThe Tribunal analyzed whether the investment in question was indeed unexplained. It was noted that the assessee had purchased an immovable property for 41,21,145/-, which was registered on 04.07.2014. The AO treated this amount as unexplained since the assessee did not provide a satisfactory explanation during the assessment proceedings.Key Evidence and FindingsThe Tribunal observed that the assessee had provided evidence of payments made for the property through three account payee cheques drawn on HDFC Bank, IndusInd Bank, and State Bank of India. The bank statements from these accounts were submitted to the AO, indicating that the payments were made from the assessee's bank accounts.Application of Law to FactsUpon reviewing the evidence, the Tribunal found that the payments for the property were made from the assessee's disclosed bank accounts, which were part of the records available to the AO. The Tribunal emphasized that since the payments were traceable to the assessee's bank accounts, the investment could not be deemed unexplained under Section 69.Treatment of Competing ArgumentsThe Tribunal considered the CIT(A)'s reasoning for upholding the AO's addition, which was based on the assessee's failure to substantiate the source of investment with supporting documents. However, the Tribunal concluded that the necessary documents, including bank statements, were indeed available and had been overlooked by the CIT(A).ConclusionsThe Tribunal concluded that the addition under Section 69 was not justified as the investment was not unexplained. The payments were made from the assessee's bank accounts, and the AO had access to these details. Therefore, the Tribunal set aside the CIT(A)'s order on this issue and directed the AO to delete the addition.SIGNIFICANT HOLDINGSThe Tribunal's significant holding was that the addition of 41,21,145/- under Section 69 was incorrect. The Tribunal stated: 'Therefore, in our opinion, the addition made by the ld. AO u/s 69 of the Act is wrong and cannot be sustained as this is not unexplained investment u/s 69 of the Act.'Core Principles EstablishedThe Tribunal reinforced the principle that for an addition under Section 69 to be sustained, the investment must be genuinely unexplained, meaning the assessee must fail to provide a satisfactory explanation for the source of the investment. If the payments are traceable to disclosed bank accounts, the investment cannot be considered unexplained.Final Determinations on Each IssueThe Tribunal determined that the CIT(A)'s order confirming the addition was incorrect. The Tribunal directed the AO to delete the addition of 41,21,145/- as unexplained investment under Section 69.