SUVARNA RAJAN MURANJAN ,MUMBAI vs. ITO WARD 42(3)(4), MUMBAI

The assessee has raised following grounds of appeal:-

Brief facts of the case are that the assessee is an individual and not filled the return of income. Based on information available with the department regarding purchase of an immovable property for Rs.77,50,000/-, the assessment was reopened u/s 147 of the Act. In response to notice issued u/s 148, the assessee filed return of income declaring total income of Rs.3,30,780/-. During the course of reassessment proceedings, the Assessing Officer called upon the assessee to explain the source of investment in the property and substantiate the claim with supporting evidences. According to the Assessing Officer, despite opportunities granted, complete documentary evidences were not furnished. The assessment was accordingly completed u/s 147 r.w.s. 144 of the Act treating investment of Rs.75,00,000/- as unexplained investment u/s 69 of the Act. The Assessing Officer further disallowed loss from house property of Rs.1,25,000/- claimed towards housing loan interest and also made a minor disallowance under Chapter VI-A. Aggrieved, the assessee preferred appeal before the Ld. CIT(A).

The Ld. CIT(A) examined the submissions and documents placed on record. The Ld. CIT(A) observed that the assessee had claimed the source of investment to be sale proceeds of an earlier property, housing loan of Rs.15,00,000/- and savings from salary income. However,

The Ld. Authorised Representative submitted that during the course of assessment proceedings the assessee had furnished details explaining the source of investment. It was submitted that the assessee had sold an earlier property for Rs.60,00,000/- and had also availed housing loan of Rs.15,00,000/-. The Ld. AR drew our attention to the documents placed in the paper book and submitted that the lower authorities failed to appreciate the same in proper perspective.

The Ld. AR further submitted that the assessee has now placed on record copy of Agreement for Sale dated 13.08.2014 relating to a flat situated at Virar sold for Rs.16,00,000/-. It was submitted that the credit of Rs.14,00,000/- appearing in the bank account on 19.12.2014 represented sale consideration received from the said transaction. The Ld. AR further referred to the sale of another property for Rs.60,00,000/- and submitted that the payment of Rs.46,47,556/- made on 04.04.2015 towards purchase of the impugned property was sourced from the said 3

The Ld. Departmental Representative relied upon the orders of the lower authorities and submitted that the assessee had failed to substantiate the source of investment before the Assessing Officer despite sufficient opportunities.

We have heard the rival submissions and perused the material available on record. The assessment in the present case has been completed u/s 147 r.w.s. 144 of the Act. The addition has been made primarily because the assessee failed to substantiate the source of investment in the residential property with cogent documentary evidence. The Ld. CIT(A), after examining the material available before him, recorded detailed reasons for sustaining the addition to the extent of Rs.73,05,000/-.

We find that the Ld. CIT(A) has specifically observed that the housing loan of Rs.15,00,000/- was sanctioned only on 06.05.2015 whereas substantial payments towards acquisition of the property had already been made prior to that date. The Ld. CIT(A) further noted that the credit entries of Rs.14,00,000/- on 19.12.2014 and Rs.47,95,000/- on 31.03.2015 appearing in the bank account immediately preceded the payments made towards purchase of the property. Since the assessee failed to furnish supporting evidence explaining the source of these credits, the Ld. CIT(A) treated the investment to that extent as unexplained.

Before us, the assessee has placed reliance on additional evidences which were either not available before the Assessing Officer or were not subjected to proper verification. The assessee has now explained that the

At the same time, we notice that the evidences presently available on record do not conclusively establish the nexus between the aforesaid sale transactions and the credit of Rs.47,95,000/- appearing in the bank account on 31.03.2015. The necessary fund trail, supporting bank statements and corroborative evidences establishing the movement of funds have not been examined by the Assessing Officer. Similarly, the impact of the additional evidence relating to the Virar property transaction on the source of investment requires factual verification.

In our considered view, the additional evidences now brought on record have a direct bearing on the determination of the source of investment. Since the assessment was completed u/s 144 of the Act and the evidences now relied upon by the assessee were not subjected to proper verification by the Assessing Officer, the issue cannot be satisfactorily adjudicated at the appellate stage without verification of primary facts. We, therefore, set aside the orders of the lower authorities and restore the matter to the file of the Assessing Officer for de novo adjudication. The Assessing Officer shall examine the evidences relating to sale of the Virar property, sale of the property stated to have been sold for Rs.60,00,000/-, source of the credit of Rs.47,95,000/- appearing in the bank account on 31.03.2015, housing loan documents and all other supporting evidences that may be furnished by the assessee. The Assessing Officer shall thereafter decide the issue afresh in accordance

Since the claim of deduction of interest on housing loan is intrinsically connected with verification of the housing loan transaction and acquisition of the property, the same is also restored to the file of the Assessing Officer for fresh adjudication. We make it clear that we have not expressed any opinion on the merits of the additions and all issues are left open.

In the result, the appeal of the assessee is allowed for statistical purposes.