2025 (10) TMI 40 - AT - Income Tax

Appeal partly allowed: s.69 addition of Rs.5,15,000 sustained; Rs.4,55,000 deletion accepted as stamp duty reversal

ITAT upheld the AO's addition under s.69 for unexplained bank credits totaling Rs.5,15,000, finding the assessee failed to prove their nature and source. ... Addition u/s 69 - assessee failed to prove the nature and source of the balance credit entries in his bank account - HELD THAT:- Credit amount was nothing but the reversal of stamp duty paid on 21.05.2014. As regards the objection of CIT(A) that the assessee could not prove the source of the aforesaid payment, from the perusal of the bank statement, we find that on 19.05.2014, the assessee had a credit entry in his bank account of Rs. 9 lakh, which has not been doubted by the lower authorities. Therefore, we are of the considered view that the assessee had sufficient balance in his bank account to make the payment of stamp duty of Rs. 4,55,000/-. Remaining payment amount assessee could not bring any documentary evidence on record to prove the nature and source of such credit entry for making the investment in the immovable property. Despite the fact that all these credit entries were in the running bank account of the assessee, when it is found that the assessee has made an investment, we are of the considered view that the responsibility lies on the assessee to explain the nature and source of such investment under section 69 of the Act. As in the present case, the assessee could not bring any material to explain the nature and source of the credit entry, totalling Rs. 5,15,000/-, to this extent, we do not find any infirmity in the findings of the learned CIT(A) in upholding the addition under section 69 of the Act. As regards the payment of Rs. 4,55,000/-, in view of our aforesaid findings, we direct the AO to delete the addition made under section 69 of the Act. Accordingly, the grounds raised by the assessee are partly allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether additions under section 69 of the Income-tax Act can be sustained in respect of unexplained credit entries in the assessee's bank account relied upon as part of consideration for purchase of immovable property. 2. Whether particular bank credits (specifically a credit of Rs. 4,55,000 alleged to be reversal of stamp duty) were satisfactorily explained by documentary evidence such that they cannot be treated as unexplained investments under section 69. 3. (Raised but not decided as a substantive contested point) Whether the learned CIT(A) erred in violation of principles of natural justice by not giving an opportunity to be heard before dismissing the appeal - note: the Tribunal proceeded to consider the addition under section 69 as the solitary issue for adjudication. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sustenance of additions under section 69 for unexplained bank credits forming part of investment in immovable property Legal framework: Section 69 imposes liability where the assessee has made investments and the nature and source of the investment are not satisfactorily explained. When credits in a running bank account are relied upon by the Revenue as source of investment, the burden rests on the assessee to explain the nature and source of such credits to discharge the burden under section 69. Precedent Treatment: No external precedents were cited or relied upon by the Tribunal in the impugned order. The Tribunal applied settled principles regarding burden of explanation under section 69 as reflected in the assessment and appellate reasoning. Interpretation and reasoning: The Tribunal noted that several specific credit entries in the assessee's Axis Bank account were relied upon by the Assessing Officer to support an addition of Rs.10,45,000 as unexplained investment. The CIT(A) had deleted a portion (Rs.75,000) after considering submissions; the Tribunal proceeded to examine explanations and documentary evidence for remaining credits. The Tribunal emphasised that where an investment (purchase of immovable property) is found, the assessee bears responsibility to explain the source of funds used for such investment. In respect of credits for which no documentary evidence (identity, genuineness, creditworthiness, or other supporting particulars) was produced, the Tribunal agreed with the CIT(A) that the assessee failed to discharge the onus and that the addition under section 69 was justified to the extent of unexplained credits totalling Rs.5,15,000. Ratio vs. Obiter: Ratio - where an assessee makes an investment and cannot satisfactorily explain the nature and source of bank credits relied upon as funding for that investment, additions under section 69 are sustainable. Obiter - none material on this point beyond application of the principle to the facts. Conclusion: The Tribunal upheld additions under section 69 in respect of unexplained credit entries aggregating Rs.5,15,000, finding no infirmity in the CIT(A)'s conclusion on that portion. Issue 2 - Whether a specific credit of Rs.4,55,000 was satisfactorily explained as reversal and re-payment of stamp duty Legal framework: Transactions appearing as debits and subsequent credits in bank statements may be explained by contemporaneous documentary evidence (agreements, challans, bank statements showing reversal, stamp duty challan) to demonstrate the true nature of the entries and to rebut characterization as unexplained investments under section 69. Precedent Treatment: Tribunal did not invoke or distinguish any reported decisions; it relied on documentary record and conventional inferential standards (bank statement entries, agreement for sale, challan) to determine whether the explanation was satisfactory. Interpretation and reasoning: The assessee produced the bank statement showing a credit of Rs.4,55,000 on 22.05.2014, an agreement for sale (dated 30.05.2014) and a stamp duty challan dated 27.05.2014. The authorised representative contended that the 22.05.2014 credit was the reversal of a stamp duty payment made on 21.05.2014 and that the assessee paid stamp duty again on 24/27.05.2014. The Tribunal examined the papers and found that the agreement and challan supported the contention that Rs.4,55,000 related to stamp duty movement and that the bank account had an earlier undisputed credit of Rs.9,00,000 on 19.05.2014 sufficient to meet the initial stamp duty payment. The Tribunal therefore accepted that the credited amount on 22.05.2014 was a reversal and not an unexplained inflow representing undisclosed investment funds. Ratio vs. Obiter: Ratio - where documentary evidence (bank statements showing corresponding debits/credits, agreement for sale, and stamp duty challan) explains a questioned bank credit as reversal of a prior payment and shows sufficiency of funds, that credit cannot be treated as unexplained for the purpose of section 69. Obiter - comments that the existence of a prior undisputed credit (Rs.9,00,000) supported the explanation. Conclusion: The Tribunal directed deletion of the addition insofar as it related to Rs.4,55,000, finding the credit satisfactorily explained by documentary materials and contemporaneous bank entries. Issue 3 - Allegation of violation of principles of natural justice by the CIT(A) Legal framework: Fundamental requirements of natural justice require opportunity of hearing before adjudicatory action; appellate orders must not be passed in violation of such principles. However, if the Tribunal proceeds to examine merits and decides contested issues on record, the practical impact of any procedural contention depends on whether any prejudice resulted. Precedent Treatment: The Tribunal did not elaborate or cite authority on natural justice; the recorded course of proceedings indicates the Tribunal confined its adjudication to the substantive addition under section 69 and treated it as the 'solitary issue' for consideration. Interpretation and reasoning: Although the assessee had raised a ground alleging violation of natural justice, the appeal before the Tribunal focused solely on the addition under section 69. The Tribunal addressed the substantive merits, examining documentary evidence and bank records; it granted partial relief and upheld the balance addition. No separate finding of procedural infirmity or prejudice arising from denial of hearing before the CIT(A) was recorded. Ratio vs. Obiter: Obiter - the Tribunal's treatment indicates that where the appellate adjudication proceeds on merits and the record permits decision on substantive issues, procedural pleas not shown to have caused prejudice may not alter the outcome; however, the Tribunal made no express ruling on the alleged natural justice violation. Conclusion: The Tribunal did not allow the natural justice ground as a separate basis for relief; it confined decision to the substantive correctness of additions under section 69 and partly allowed the appeal on merits (deleting Rs.4,55,000, upholding the remainder). Overall Disposition The appeal was partly allowed: the Tribunal deleted the addition of Rs.4,55,000 (found to be satisfactorily explained as reversal/repayment of stamp duty supported by agreement and challan and bank entries) but sustained additions totaling Rs.5,15,000 as unexplained investments under section 69 because the assessee failed to prove the nature and source of those credit entries. The Tribunal did not separately uphold any relief on the procedural (natural justice) ground.