2025 (9) TMI 638 - AT - Income Tax

Addition under section 69 deleted for cash land purchase after assessee proved RTGS source and documentary evidence

Shikha Agrawal Versus The Income Tax Officer, Ward-1, Raigarh

ITAT RAIPUR-AT deleted an addition under s.69 relating to cash paid for purchase of land, finding the AO made a summary, perverse, and arbitrary addition ... Addition on unexplained investment u/s. 69 - cash paid for purchase of land - non- application of mind - HELD THAT:- It is not the case of the department that apart from total sale consideration paid, there is also some on money which was paid and not disclosed by the assessee. It is also not the case of the department that the credibility of husband of the assessee is in doubt. Everything is on record and explained by the assessee before the A.O. However, before making the said addition the A.O has not applied his mind and has summarily made the addition without making any enquiry as regards RTGS entry from husband to the assessee. This action of the A.O is perverse, arbitrary and sans independent application of mind. See Sanjeev Kumar, C/o M/s. Raj Kumar & Associates [2023 (10) TMI 1027 - ITAT DELHI] When the source of such investment was explained by the assessee and there has not been any enquiry conducted by the department, tax liability could not be arbitrarily imposed on the tax payer assessee when all legal compliances have been met out. DR did not contend that those documents placed on record were additional evidence. When all documentary evidences had been filed by the assessee before the A.O, such addition made based on summary observation without any legal validity cannot be sustained. Hence, the A.O is directed to delete the said addition from the hands of the assessee. Thus, the Ground of appeal raised by the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether addition of Rs. 1,98,000 as unexplained investment under section 69 can be sustained where the assessee furnished documentary evidence that the cash paid for purchase of property was sourced from husband by RTGS and no adverse material was placed on record by the Revenue, and whether the Assessing Officer applied independent mind before making the addition. 2. Whether addition of Rs. 13,15,000 as unexplained money under section 69A is sustainable where the assessee produced bank statements, loan confirmation, income-tax return and computation of the alleged donor (husband) and evidence of past savings for the cash deposit, and where the Revenue did not disprove the documentary evidence. 3. Whether imposition of tax under section 115BBE on additions made by the Assessing Officer is sustain able (treated as consequential to the above issues). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Addition of Rs. 1,98,000 under section 69 (unexplained investment) Legal framework: Section 69 deals with unexplained investments - where the assessee is unable to satisfactorily account for investments, the value is added as income. The Assessing Officer must examine and apply mind to the materials placed on record and cannot make additions on mere suspicion. Precedent treatment: The Tribunal relied on prior decisions which emphasize that assessments based on conjecture or without proper application of mind are unsustainable. The decision of a coordinate Bench and the High Court (as cited in the judgment) were followed to the extent they hold that tribunals or authorities must not travel beyond the scope of the charge or make additions without enquiry; additions under an incorrect charging section or without enquiry are vulnerable. Interpretation and reasoning: The Court examined the material on record showing that the cash payment of Rs. 1,98,000 for purchase of property corresponded to funds received from the husband by RTGS as part of the total consideration. The assessee had produced bank entries and explanations before the Assessing Officer. The Court found that the Assessing Officer did not make any enquiry into the RTGS entry or the husband's account and made the addition summarily. The Court held that when source is explained by documentary evidence and the department does not challenge the credibility of the alleged source, the AO cannot arbitrarily impose tax by making addition without independent application of mind. The Court applied the principle that assessment cannot be based on bare suspicion or conjecture, and highlighted that the Revenue did not contend that documents were additional evidence or were fabricated. Ratio vs. Obiter: Ratio - An addition under section 69 cannot be sustained where the assessee furnishes credible documentary evidence explaining the source of investment and the Assessing Officer makes a summary addition without enquiry or independent application of mind. Obiter - references to specific coordinate Bench rulings and their factual parallels serve illustrative value but the controlling proposition is the requirement of reasoned enquiry. Conclusion: The Court deleted the addition of Rs. 1,98,000 under section 69. Ground No.2 is allowed. Cross-reference: This conclusion informs the consequential challenge to application of section 115BBE (Issue 3), since taxability under 115BBE was premised on the additions made by the AO. Issue 2 - Addition of Rs. 13,15,000 under section 69A (unexplained money) Legal framework: Section 69A treats unexplained money as income where credits or deposits are not satisfactorily explained. The Revenue bears the onus to disprove the explanations or show that documents are false; the assessee may discharge burden by producing bank statements, confirmations, and corroborative evidence evidencing source of deposits. Precedent treatment: The Court relied on established authorities holding that suspicion cannot substitute for proof, and that revenue powers do not permit assessments on pure guesswork. It followed precedents requiring proper enquiry and rejection only where documentary evidence is shown to be false or inadequate. Interpretation and reasoning: The assessee submitted that Rs. 10,75,000 was received from husband (supported by bank statements and a confirmation of account reflecting a loan transaction) and that Rs. 2,40,000 was from past savings (supported by bank balances). The Revenue did not produce any material to impeach or disprove these documents. The Court observed that the Assessing Officer relied on suspicion and conjecture and improperly rejected tenable material without pointing to any fabrication or falsehood. Citing the principle that assessments cannot be made on bare suspicion and must be founded on evidence, the Court concluded that the AO's addition under section 69A was misplaced. Ratio vs. Obiter: Ratio - Additions under section 69A are not sustainable where the assessee furnishes documentary evidence adequately explaining the entries and the Revenue fails to disprove or impugn those documents; assessments cannot be founded on mere suspicion. Obiter - detailed references to specific documentary items (accounts, ITR, computations) are factual findings applicable to the case. Conclusion: The Court deleted the addition of Rs. 13,15,000 under section 69A. Ground No.3 is allowed. Cross-reference: The deletion of these additions bears on the consequential application of section 115BBE (Issue 3) since imposition of taxation under that section was contingent on the impugned additions. Issue 3 - Application of section 115BBE on the impugned additions Legal framework: Section 115BBE prescribes taxation of certain unexplained incomes at a special rate. Its applicability arises only where additions of unexplained income stand sustained. Precedent treatment: The Court treated this issue as consequential. Precedents support that consequential relief flows when primary additions are deleted; taxing provisions dependent on those additions cannot survive if the additions are set aside. Interpretation and reasoning: Since the primary additions under sections 69 and 69A were deleted for lack of justification and improper application of mind by the Assessing Officer, any application of section 115BBE to those additions is also unsustainable. The Court noted that Ground No.4 was consequential and did not require separate adjudication once the foundational additions were deleted. Ratio vs. Obiter: Ratio - Section 115BBE cannot be validly applied to amounts which are not demonstrably additions to income under the charging provisions; consequential relief follows deletion of primary additions. Obiter - none. Conclusion: Consequent to deletion of the additions, application of section 115BBE to those amounts is not sustainable. Ground No.4 is consequentially resolved in favour of the assessee. Overall Conclusion and Reasoning Summary The Court held that the Assessing Officer's additions under sections 69 and 69A were arbitrary and based on conjecture because the assessee had placed credible documentary evidence (bank statements, RTGS records, loan confirmation, ITRs and computations) explaining the source of funds and the Revenue did not rebut or impeach those materials. The AO failed to make any independent enquiry into the RTGS transfers and other documentary evidence. Reliance was placed on the principle that suspicion cannot take the place of proof and that assessments must be founded on evidence. Accordingly, the additions were deleted and any consequential application of section 115BBE fell away. The Court followed prior rulings emphasizing the need for reasoned application of mind and that revenue authorities cannot make additions on pure guesswork.