SHRI PRAKASHBHAI DAHYABHAI BABARIYA,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(1), BHAVNAGAR

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ITA 456/AHD/2016Status: DisposedITAT Ahmedabad15 March 2018AY 2009-103 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the investments made out of loans from the assessee's brother and wife, who are assessed to tax and whose existence is not in doubt, cannot be treated as unexplained investments. The genuineness of these loans was prima facie established.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 10,25,000/- as unexplained investment under Section 69B, treating investments in Kotak Mahindra Investments Ltd. debentures as unexplained. The assessee claimed the source was interest-free unsecured loans from his brother and wife.

What were the issues?

Whether investments made from loans provided by relatives, who are assessed to tax, can be considered unexplained investments. Whether the AO was justified in treating the investment as unexplained without establishing the lack of genuineness of the loans.

Which sections of the Income-tax Act were involved?

Section 69B,Section 143(3),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD ‘B’ BENCH, AHMEDABAD

Per Pramod Kumar, AM:

1.

This appeal filed by the assessee appellant is directed against order dated 21.12.2015, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act 1961 (‘the Act’ hereinafter), for the assessment year 2009-10. 2. Grievance raised by the assessee is as follows :-

“1. The learned CIT(A)-6, Ahmedabad has erred in law and on facts in confirming the action of the AO in making addition of Rs.10,25,000/- by treating the same as unexplained investment under section 69B of the Act.”

ITA No.456/Ahd/2016 Assessment Year: 2009-10 Page 2 of 3 3. Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings, the Assessing Officer made the impugned addition of Rs.10,25,000/- by observing as follows :-

“8. It is further seen from the records that as per the Annual Information Return furnished by the Kotak Mahindra Investments Ltd. u/s.285BA of the Act, the assessee has made investment of Rs.10,25,000/- in Bonds/Debenture of Kotak Mahindra Investments Limited during the year under consideration. During the course of assessment proceedings, the assessee was requested to furnish source with documentary evidence of the same. However, the assessee did not furnish the same. Hence, a show cause vide this office letter dared 21.11.2011 was issued and served upon the assessee as to why the investment of Rs.10,25,000/- should not be treated as unexplained investment u/.s.69B of the Income-tax Act, 1961 and added to total income.

8.1 The assessee furnished reply of the same vide his submission dated 08.11.2011 and 28.11.2011. The reply of the assessee is considered. On careful consideration of the same, it is seen that there is no substance in it. It is also not supported by any cogent documentary evidence. It is contended by the assessee that source of the investment of Rs.10,25,000/- in the above bond debenture of Kotak Mahindra Investment Limited is from the interest free unsecured loans taken from Shri Girishbhai D Babariya, his brother and Smt. Pushpaben Prakashbhai, his wife. In this regard, it is observed that a lay man would think of making an investment only when he is having spare money. He would never think of investment if he does not have his own fund. In the case of assessee, it is claimed by the assessee that his brother gave him interest free loan of Rs.7,00,000/- for the purpose of making investment in the above bonds/debentures. Meaning thereby that Shri Girishbhai D Babariya, the brother of assessee, instead of making investment out of his own spare money in his own name and earning something out of it, he parted with those Rs.7 lacs and lost not only the interest on his spare money but also, the dividend on the such investment in Bond/Debenture. No prudent person would do like this.

8.2 Without prejudice to the above, as discussed above, the creditworthiness and competency of both the depositors are not established by the assessee. Hence, above investment of Rs.10,25,000/- made in Bonds/Debenture of Kotak Mahindra Investments Limited during the year under consideration remain unexplained. Accordingly, the said investment of Rs.10,25,000/- is treated as unexplained investment u/s.69B of the Income-tax Act, 1961. Thus, an amount of Rs.10,25,000/- is added to the total income. Penalty proceedings u/s.271(1)(c) of the Income-tax Act, 1961 is initiated on this issue for furnishing inaccurate particulars of income.”

4.

Aggrieved, assessee carried the matter in appeal but without any success. The assessee is not satisfied and is in further appeal before us.

ITA No.456/Ahd/2016 Assessment Year: 2009-10 Page 3 of 3 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position.

6.

We have noted that the investments in Kotak Mahindra Investment Limited’s debenture are made out of loans from Shri Girishbhai Babariya, brother of the assessee (Rs.7,00,000/-) and Smt. Pushpaben Babariya, wife of the assessee (Rs.2,35,000/-) and credit balance in assessee’s overdraft account. Both the lenders are assessed to tax and their assessment details are on record. The existence of these persons is not in doubt and they are related to the assessee. Under these circumstances, investments made out of these funds cannot, by any stretch of logic, be treated as unexplained investments. As regards any issues about sources of income of these persons, the same can be, given the circumstances of this case and our prima facie satisfaction with the bonafides, can only be addressed in their respective assessments. In any event, having perused the material on record, we are satisfied prima facie about the genuineness as well. In the light of these discussions and bearing in mind entirety of the case, we delete the impugned additions. The assessee gets the relief accordingly.

7.

In the result, the appeal is allowed in the terms indicated above. Pronounced in the open Court on this 21st day of March, 2018.

Sd/- Sd/- Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Dated: 21st March, 2018

PBN/*

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) DR (6) Guard File

By order

Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad

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