PRASHANTKUMAR ASHOKBHAI BUWA,VADODARA vs. THE ITO, WARD-1(2)(2), VADODARA

The grounds of appeal are as under:- “1. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the addition of Rs. 4,96,875/- on account of unexplained investment under section 69 r.w.s. 115BBE of the Income Tax Act, 1961. 2. That the CIT(A) failed to appreciate the documentary evidences & explanation filed during appellate proceedings. 3. That the addition is bad in law and liable to be deleted. 4. That the appellant craves leave to add, amend, alter, or withdraw any of the above grounds at the time of hearing.”

The assessee, Shri Prashantkumar Ashokbhai Buwa (PAN: AOVPB7404A) is an individual, has filed ITR-1 for A.Y. 2019-20 on 31.08.2019 declaring total income of Rs. 2,79,260/-. Thereafter, Assessee filed ITR-3(revised) for the A.Y. 2019-20 on 24.09.2020 declaring total income of Rs. 2,60,960/-. As per information, a survey u/s 133A of the Act was conducted in the business premises of Samanvay Group on 30.05.2019 documents related to cash payment of Rs. 300000/- made by the assessee were found and impounded. On the basis of above material impounded in case of Samanvay Group, the case of the assessee was reopened u/s. 147 of the Act and a notice u/s. 148 of the Act was issued to the assessee on 31.03.2023. In response to the notice u/s 148 of the Act, the assessee filed return on 23.05.2023 declaring total income at Rs. 2,60,960/-. Subsequently, various notices u/s. 143(2) of the Act, u/s 142(1) of the Act along with show cause notices were issued to the assessee. In response to these notices, assessee submitted relevant details/documents and the same were perused and examined. During the course of assessment, AO observed that the assessee booked a Unit No. Comm-435 at Samanvay Westbreeze for total consideration of Rs. 751000/- and an agreement to sale was also executed with the builder. Further, regarding payment for said consideration, assessee submitted that he paid Rs. 3,00,000/- in cash and Rs. 2,30,000/- thorough banking channel and with respect to the amount of remaining Rs. 2,21,000/-, assessee stated that 'the balance amount will be paid at the time of executing sale deed'. However, AO noticed that as per the payment schedule of the registered document, provided by the assessee, the amount to be paid at the time of execution of the agreement was Rs. 24,125/- only. So, the difference amount of Rs. 1,96,875/- (2,21,000 24,125), remained 2 unexplained and was in nature of unexplained investment. During the course of assessment, assessee failed to explain the nature and source of the funds utilized towards payment of Rs. 3,00,000/- in cash and Rs. 2,30,000/- through banking channel.Therefore, Rs.7,26,875/- (Rs.3,00,000/-+ Rs.2,30,000/- Rs.1,96,875/-), remained unexplained as provided under the provisions of section 69 r.w.s. 115 BBE of the Income Tax Act, 1961 and added back to the income of the assessee for the year under consideration. Further, assessee submitted that he wrongly claimed depreciation of Rs. 86,417/-. Therefore, the same was disallowed and added to the income of the assessee for the year under consideration. Therefore, assessment was completed u/s 147 r.w.s. 144B of the I.T. Act, 1961 at assessed income of Rs. 10,74,252/- (Rs. 2,60,960/- + Rs. 7,26,875/- u/s 69+ Rs. 86,417/- Disallowance claim of depreciation). Penalty proceedings u/s 271AAC(1) and section 270A of the Act were also initiated.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The ld. A.R. submitted that the assessee has booked a unit in the project 'Samanvay Westbreeze' and the assessee has paid cash of Rs. 3,00,000/- to the builder. During the course of assessment proceedings, the assessee was supposed to justify the source of this cash and the assessee has furnished justification to this cash of Rs. 3,00,000/- and contended that his family members have arranged this amount of Rs. 3,00,000/- for him to be given to builder on the auspicious occasion of 'Maha Shivratri'. In support, the assessee has furnished 3 affidavits of his family members to the AO as well as CIT (Appeals). (these affidavits have been produced in the paper book). Therefore, it is prayed to delete this addition of Rs. 3,00,000/- and grant relief to that extent. The ld AR submitted that the assessee took a loan from bank for booking the unit in the project. The ld.CIT (Appeal) has deleted this addition of Rs. 2,30,000/- as this transaction was occurred through loan. The Ld. AR submitted that this addition of Rs. 1,96,875/- was made based on 'agreement to sale' (extract of conditions are referred on page 6 of the assessment order). As per this agreement to sale, the assessee was supposed to make payment in different instalments as mentioned therein. However, the assessee has paid Rs. 53,550/- only and he never made further payments to the builders. Moreover, the deal of purchase of this unit was also cancelled and a cancellation deed was executed on 08.05.2025. The builder has returned Rs. 11,870/- to the assessee on 06.08.2025, after deduction of taxes & other charges (cheque no. 096616). The assessee has also paid amount of Rs. 2,20,289/-, after deduction of interest, foreclosure charges & outstanding EMI, to HDFC Bank on 10.06.2025. (original loan: 2,30,000). It is reiterated that the assessee has not paid money to the builder, except, Rs. 53,550/-, which were even returned to the assessee, after deduction of taxes & charges. Therefore, it crystal clear that the deal got cancelled and the money were returned to the assessee and hence, this addition of Rs. 1,96,875/- cannot be sustained as this money was never ever paid to the builders. The ld. A.R. submitted to direct the AO to verify these facts.

The ld. D.R. relied upon the assessment order and the order of the CIT(A).

Heard both the parties and perused all the relevant material available on record. As regards to addition to Rs. 4,96,875/- on account of unexplained investment, the assessee has given the details thereby making bifurcation of the amount to the extent of Rs. 3,00,000/-, 2,30,000/- 1,96,875/- and the details were placed before the Assessing Officer as well as before the CIT(A). The affidavit of the family members along with their bank records has categorically mentions that these amounts was utilized by the assessee and subsequently there was a cancellation deal which was executed. Thus, the addition sustained uptil 4,96,875/- u/s. 875/- u/s. 69 r.w.s. 115BBE by the CIT(A) is not justified.

In the result, the appeal of the assessee is allowed.