2025 (12) TMI 162 - AT - Income Tax

Addition under Sections 69 and 148 deleted as taxpayer explains property investment source, including cash from father's VRS

ITAT Mumbai allowed the assessee's appeal, deleting the addition made u/s 69 in respect of investment in immovable property not disclosed in the return ... Addition u/s 69 - assessee had invested in purchase of immovable property during the year under consideration and the same was not shown in the return of income filed in response to notice u/s. 148 - HELD THAT:- Only transaction of cash deposited in assessee's bank account on 30.08.2010, found to be doubtful as the same has been corroborated from father's receipts of VRS in January 2007 to the extent of Rs. 4.00 Lac, for which no recent cash withdrawal for such amount were made, however, on presumption it can be considered that his father would have provided such funds from his sources, in absence of any negative inference or evidence by revenue. We, therefore, are of the considered view that the assessee had duly explained the source of the amount of impugned addition thus no reason left to treat the same as unexplained Investment within the meaning of Section 69. Accordingly, we reverse the decision of the Ld. CIT(Appeals)/NFAC to that extent and direct to delete the addition of in the hands of the assessee. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the delay of 404 days in filing the appeal before the Tribunal ought to be condoned under Section 5 of the Limitation Act, 1963. 1.2 Whether the balance investment of Rs. 16,00,000/- in an immovable property, after accepting Rs. 24,00,000/- as explained through housing loan, constituted 'unexplained investment' liable to addition under Section 69 of the Income-tax Act, 1961. 1.3 Whether the demand of tax, surcharge and education cess of Rs. 26,50,420/- required separate adjudication once the addition under Section 69 was deleted. 2. ISSUE-WISE DETAILED ANALYSIS 2.1 Condonation of 404 days' delay in filing the appeal Legal framework (as discussed) 2.1.1 The Tribunal considered Section 5 of the Limitation Act, 1963 in light of recent pronouncements of the Supreme Court and a High Court holding that a justice-oriented and liberal approach should be adopted in condonation of delay when disposal on limitation would undermine adjudication on merits. Interpretation and reasoning 2.1.2 The Tribunal accepted that the assessee had been residing abroad (Abu Dhabi, UAE) since 2017 for employment and was unable to effectively liaise with a tax advisor in India, which caused the delay. 2.1.3 It was noted that the Revenue did not object to condonation and produced no material to show malafide or lackadaisical conduct by the assessee. 2.1.4 Relying on the judicial view that merits should not be defeated solely on technical ground of limitation and that a liberal and judicious approach is warranted when there is sufficient cause, the Tribunal held that the delay was caused by circumstances beyond the assessee's control. Conclusions 2.1.5 The delay of 404 days in filing the appeal was condoned and the appeal admitted for adjudication on merits. 2.2 Addition of Rs. 16,00,000/- as unexplained investment under Section 69 Legal framework (as discussed) 2.2.1 The addition was made by treating the entire property investment of Rs. 40,00,000/- as unexplained under Section 69; in appeal, Rs. 24,00,000/- was accepted as explained (housing loan from LIC Housing Finance Ltd.), and Rs. 16,00,000/- was sustained as unexplained investment under Section 69. Interpretation and reasoning 2.2.2 The Tribunal examined the assessee's detailed reconciliation of payments made to the builder and correlated each payment with bank statements and supporting documents on record, including: * Rs. 5,00,000/- (16.08.2010): sourced from (a) refund of Rs. 4,11,000/- from an earlier flat booking (builder confirmation and bank credit), and (b) personal loan of Rs. 2,06,023/- from a bank, both reflected in the assessee's bank account. * Rs. 2,00,000/- (20.08.2010): sourced from Rs. 1,47,000/- transferred from the assessee's father's bank account and Rs. 53,000/- from existing bank balance consisting of past savings, salary and personal loan funds. * Rs. 5,00,000/- (03.09.2010): sourced from cash deposit of Rs. 6,00,000/- in the assessee's bank account, explained as Rs. 4,00,000/- from father (linked to VRS receipts from employer) and Rs. 2,21,100/- from mother (receipts from sale of old gold jewellery), corroborated by VRS documents and jewellery sale bills. * Rs. 64,633/- (15.06.2012), Rs. 2,00,000/- (28.01.2014) and Rs. 1,50,000/- (08.04.2014): traced to salary income credited through ECS from the employer, supported by income-tax returns and bank statements for the relevant years. 2.2.3 The Tribunal found that the payments made through the assessee's bank account were verifiable and supported by documentary evidence, establishing the nexus between the property payments and the identified sources (refund from earlier builder, personal loan, parental funds, and salary income). 2.2.4 The Tribunal noted that the only aspect considered doubtful was the cash deposit of Rs. 6,00,000/- on 30.08.2010, sought to be explained as received from the assessee's father and mother. Although there were no contemporaneous large cash withdrawals matching that exact amount, the father's VRS receipts and the mother's jewellery sale documents were on record, and no adverse material had been brought by the Revenue to rebut this explanation. 2.2.5 On this basis, the Tribunal held that, on a reasonable presumption and in absence of any contrary evidence or negative inference from the Revenue, it could be accepted that the father had provided funds from his own sources and that the explanation of the assessee was plausible and supported by available material. Conclusions 2.2.6 The Tribunal held that the assessee had duly explained the source of the Rs. 16,00,000/- sustained by the first appellate authority, and that the amount could not be treated as 'unexplained investment' under Section 69. 2.2.7 The order of the first appellate authority sustaining addition of Rs. 16,00,000/- was reversed, and the addition of Rs. 16,00,000/- was directed to be deleted in full. 2.3 Consequential tax demand of Rs. 26,50,420/- Interpretation and reasoning 2.3.1 The Tribunal noted that the ground challenging the demand of Rs. 26,50,420/- (tax, surcharge and education cess) was dependent on and flowed from the substantive addition under Section 69. 2.3.2 Since the substantive addition forming the basis of the demand was deleted, the question of separate adjudication of this ground did not arise. Conclusions 2.3.3 The ground relating to the tax demand was treated as consequential and required no independent adjudication, with the liability to be recomputed in accordance with the deletion of the addition.