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Facts
The cases involve appeals by two assessees (Late Smt. Ramilaben Harshadrai Patel and Devraj Harshadrai Patel) and a cross-appeal by the Income Tax Department concerning additions related to long-term capital gains, unexplained cash credits under Section 68, and unexplained investments under Section 69 for the Assessment Year 2016-17, primarily arising from the sale of immovable property and related investments.
Held
The Tribunal allowed the assessees' appeals, deleting the additions for long-term capital gains (allowing indexed cost benefit), unexplained cash credits (finding sufficient proof of genuineness and creditworthiness), and unexplained investments (source adequately explained). Consequently, the Department's appeal against the relief granted by the CIT(A) to one of the assessees was dismissed.
Key Issues
The key issues were the justification of Long Term Capital Gain addition without allowing indexed cost/Section 54B exemption and the validity of additions under Section 68 and Section 69 for unexplained credits/investments when the assessee provided supporting documentation for the source and genuineness of funds.
Sections Cited
54B, 68, 69, 234A
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
ITA No. 1092/Ahd/2023 & 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 2– O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These are appeals have been filed by the Assessee and the Department against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi vide order dated 31.10.2023 in the case of Late Smt. Ramilaben Harshadrai Patel (through L/h. son Devraj H. Patel in & by the assessee in the case of Devraj Harshadrai Patel (in and the Department (in Ld. CIT(A) for A.Y. 2016-17 dated 07.11.2023.
We shall first take up the appeal of the assessee in in the case of Late Smt. Ramilaben Harshadrai Patel (through Legal Heir Devraj Harshadrai Patel)
The Assessee has taken the following grounds of appeal:-
“1. The learned CIT(A) NFAC has erred in law and on facts in upholding addition of long term capital gain at Rs.40 Lakhs without allowing deduction for Index cost and exemption u/s. 54B in as much as that as per assessee taxable capital gain was NIL and without appreciating the facts and circumstances of the appellant.
2. He has erred in law and on facts in upholding addition of Rs. 38,50,000 u/s. 68 and holding that assessee failed to discharge onus to prove cash credit in as much as that the full details explaining cash credit have been furnished but not considered and the assessee has discharged the onus cast on her.
3. The learned CIT(A) has grievously erred in law and on facts in not considering the detailed submission furnished by the assessee on 30.01.2020 to the then CIT(A)-3, Ahmedabad explaining with documents the details of capital gain as well as loans taken rendering the additions upheld by CIT(A) as erroneous factually as well as legally.
& 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 3– 4. On the facts of the assessee read with the submissions submitted on 30.01.2020, the return income of Rs.17,14,550 ought to have been accepted.
On the facts of the assessee no interest u/s. 234-A ought to have been levied.
The appellant craves leave to add, to alter and/or modify any grounds of appeal.” Ground No.1: Addition of Long Term Capital Gain amounting to Rs. 40 lakhs.
The brief facts in relation to this ground of appeal are that the assessee had sold immovable property, jointly with other co-owners for an amount of Rs. 2,00,00,000/-. Out of the above sale consideration, an amount of Rs. 40,00,000/- was received by the assessee from Harishbhai Prahladbhai Patel (purchaser) through banking channels and an amount of Rs. 40,000/- was also withheld by the purchaser as Tax Deducted at Source (TDS). During the course of assessment, the Assessing Officer observed that against the aforesaid sale consideration of Rs. 40 lakhs, the assessee had shown capital gains of Rs. 17,14,550/- only and has claimed benefit of TDS of Rs. 40,000/- deducted by the purchaser. The Assessing Officer asked the assessee to give justification of the capital gains offered to tax amounting to Rs. 17,14,500/-, however, the Assessing Officer observed that the assessee has not been able to give any justification on how she had worked out the capital gains amounting to Rs. 17,14,500/-. Accordingly, the Assessing Officer added the entire sale consideration of Rs. 40,00,000/- (being 1/5th share of the assessee on sale of such property) and accordingly, added a sum of Rs. 22,85,450/-.
4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee by observing that the assessee has been able to furnish evidence of investment in new property & 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 4– and hence claim of deduction under Section 54B of the Act cannot be granted to the assessee. Accordingly, Ld. CIT(A) dismissed the appeal of the assessee with the following observations:
“In such circumstances, there is no option but to confirm the addition made by the AO. As has been pointed out earlier, the appellant has failed to furnish any details/evidences to justify the claims made in this ground of appeal despite ample opportunities of more than 2 years being given to the appellant since first hearing notice was issued by NFAC to the appellant on 08/01/2021. In such circumstances, addition of Rs.40,00,000/- (Rs.17,14,550 + 22,85,450) on sale of immovable property as LTCG made by the AO is found correct and thus, ground 3 is dismissed.”
5. Before us, the Counsel for the assessee submitted that there were five co- owners in such property, with each co-owner having 20% share. One of the co- owners having 20% share was the son of the assessee, Shri Devraj Harshadrai Patel, in whose case similar addition of Rs. 40 lakh was made by the Assessing Officer with respect to his 1/5th share in the above property. However, on identical set of facts, Ld. CIT(A) deleted the addition vide order dated 07.11.2023, based on the remand report called by Ld. CIT(A). Further, Ld. Counsel for the assessee submitted that the Department has also not challenged this addition, as is evident from the grounds of appeal raised by the Department against the order passed by Ld. CIT(A) in i.e. in the case of co-owner of this property. Accordingly, the Counsel for the assessee submitted that this ground may be decided accordingly.
6. It would be useful to reproduce the relevant extracts of the order passed by Ld. CIT(A) vide order dated 07.11.2023 in the hands of the co-owner, Shri Devraj H. Patel, for ready reference:
“I have perused the remand report of A.O., written submission and additional evidences furnished by the appellant. The appellant sold the agriculture land for Rs. 40,00,000/- (being 1/5th share of the total value of Rs. 2.0 Crore). It is observed that & 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 5– the A.O. has added total sale consideration without giving effect of the indexed cost of acquisition of the said property. The appellant has submitted the sale deed, valuation report, proof of agricultural activity. In view of the above documents and the remand furnished by the A.O., it is held that the appellant is entitled to get benefit of the indexed cost of acquisition while computing the capital gain arose with regard to sale of the aforementioned property.”
Even Ld. D.R. has accepted that the aforesaid addition is liable to be deleted in terms of aforesaid order passed by Ld. CIT(A), in the case of co-owner of this property.
In the result, Ground No. 1 of the assessee’s appeal is allowed.
Ground No.2: Addition of Rs. 38,50,000/- under Section 68 of the Act.
The brief facts in relation to this ground of appeal are that during the course of assessment proceedings, the Assessing Officer asked the assessee to verify source of investment in purchase of immovable property in which the assessee’s share was Rs. 1,62,93,867/-. In response to the notice issued by Assessing Officer the assessee furnished source of investment in such property, out of which while the Assessing Officer accepted the assessee’s explanation with regards to loan of Rs. 80 lakhs taken from M/s. AC Commodities, however, the Assessing Officer was of the view that the assessee could not explain the source of investment of Rs. 13,50,000/- being the loan taken by the assessee from his son and another sum of Rs. 25,00,000/- taken by the assessee from Reshmaben Vikrambhai Patel. Accordingly, the Assessing Officer added the aforesaid amounts as income of the assessee as unexplained cash credit under Section 68 of the Act.
10. In appeal, the Ld. CIT(A) dismissed the appeal of the assessee on the ground that the assesse has not filed details / documents in respect of unsecured & 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 6– loans amounting to Rs. 38,50,000/- and hence the creditworthiness of these persons has not been proved by the assessee.
11. Before us, with respect to loan taken by the assessee from his son, Shri Devraj Harshadrai Patel, the assessee produced before us return of income of Shri Devraj Harshadrai Patel, copy of confirmation and also extracts of the passbook of Shri Devraj Harshadrai Patel showing withdrawal of Rs. 13,50,000/- to demonstrate that both the identity as well as creditworthiness of the said lender has been duly established.
12. With regards to loan of Rs. 25,00,000/- taken by the assessee from Reshmaben Vikrambhai Patel, the Counsel for the assessee has furnished extract of the passbook showing withdrawal of Rs. 25,00,000/- by cheque in the name of the assessee, confirmation by Reshmaben Vikrambhai Patel and also submitted proof that the amount taken as loan was repaid by the assessee to Ms. Ramilaben Harshadbhai Patel on 26.04.2016 by account payee cheque. Accordingly, in light of the above facts, the Counsel for the assessee submitted that the assessee has duly discharged the onus by both giving adequate details regarding the identity of the lenders as well as their creditworthiness and hence, in light of these facts additions are not liable to be sustained in the hands of the assessee.
13. On going through the details furnished by the Counsel for the assessee, we observe that the assessee has furnished various details in support of the loan amounting to Rs. 38.50 lakhs viz. the name of the parties, their address, their return of income, confirmation of the parties, extract of the relevant passbook to show the creditworthiness of the parties etc. Accordingly, in light of the & 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 7– evidences placed on record, we are of the considered view that the assessee has been able to discharge the onus regarding the source of Rs. 38.05 lakhs from Shri Devraj Harshadrai Patel and Ms. Reshmaben Vikrambhai Patel and accordingly in light of the above facts, addition of Rs. 38,50,000/- we are of the view that the addition is not liable to be sustained in the hands of the assessee under Section 68 of the Act.
14. In the result, Ground No. 2 of the assessee’s appeal is allowed.
In the combined result, the appeal of the assessee is allowed in for A.Y. 2016-17.
Now we shall take up the assessee’s appeal in (in the case of Devraj Harshadrai Patel) for A.Y. 2016-17
The assessee has raised the following grounds of appeal:
“1. The learned CIT(A) NFAC has erred in law and on facts in upholding addition of Rs.32,96,140 u/s. 69 out of addition of Rs.1,65,86,140 made by A.O. without properly appreciating the facts and explanation of the assessee.
2. On the facts of the assessee no addition u/s. 69 of Rs.32,96,140 as un-explained investments ought to have been upheld by the CIT(A).
3. On the facts of the assessee the return income of the assessee Rs.3,12,080 ought to have been accepted without any addition.
The appellant craves leave to add, to alter and/or modify any grounds of appeal
.”
17. In appeal of the assessee there is only one effective ground regarding Ld. CIT(A) upholding addition of Rs. 32,96,140/- under Section 69 of the Act, out of total addition of Rs. 1,65,86,140/- made by the Assessing Officer.
& 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 8– 18. The brief facts with respect to the assessee’s grounds of appeal are that during the course of assessment the Assessing Officer observed that the assessee, along with co-owners had made investment in purchase of immovable property, in which the assessee’s share of investment was Rs. 1,65,86,140/-. During the course of assessment, the assessee submitted that source of above investment was loan taken by assessee from four parties, the details of which are tabulated below for ready reference: Name Address PAN Amount AC Commodities 12, Shanti Sadan Estate, AAVFA1543M 40,00,000/- Mirzapur, Ahmedabad Madhukanta Patel 01, Sauram Tower NR Vasna Bus AGVPP3687K 35,00,000/- Stand, Vasna, Ahmedabad Shilpa M Patel 399, Patel VAS NR Govt. Chora ASBPP3894L 32,90,000/- Paldi, Ahmedabad Vikrambhai M Patel 1, Pates Vas Motikhand, Thaltej, AKSPP0031E 25,00,000/- Ahmedabad Total 1,32,90,000/-
19. During the course of assessment, the Assessing Officer did not accept the creditworthiness of these parties and added a sum of Rs. 1,32,90,000/- as unexplained investment in the hands of the assessee.
20. In proceedings before Ld. CIT(A), the Ld. CIT(A) called for a remand report from the Assessing Officer and on the basis of remand report furnished by the Assessing Officer and additional details furnished by the assessee during the appellate proceedings, Ld. CIT(A) held that since the assessee has furnished various details like PAN, ITR-V, confirmation of loans, ledger account of the assessee in the books of accounts of the lenders and the relevant bank statements, the assessee has been able to prove the creditworthiness of the lenders and accordingly the additions made by the assessee with respect to the aforesaid four parties amounting to Rs. 1,32,90,000/- was directed to be deleted by the Ld.
& 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 9– CIT(A). However, Ld. CIT(A) observed that while the assessee had made investment in immovable property amounting to Rs. 1,65,86,140/-, the assessee has only been able to explain source of investment with regards to a sum of Rs. 1,32,90,000/- (as loan taken from four parties, the source of which was duly explained), however, the assessee has been able to explain the source of balance investment of Rs. 32,96,140/- and therefore, this balance amount of Rs. 32,96,140/- was confirned as unexplained investment in the hands of the assessee (total investment of Rs. 1,65,86,140/- less unsecured loans duly explained Rs. 1,32,90,000/-).
The assessee is in appeal before us against the aforesaid addition of Rs. 32,96,140/-, whereas the Department is in appeal before us against the relief of Rs. 1,32,90,000/- granted by Ld. CIT(A).
Regarding the source of balance investment, the Counsel for the assessee submitted that Ld. CIT(A) has omitted to consider the fact that during the year under consideration, the assessee has sold land as one of the co-owners, for which the assessee had received a sum of Rs. 39,60,000/- after deduction of TDS of Rs. 40,000/-, and the aforesaid amount has already been shown in the income by the assessee as Long Term Capital Gain. The Counsel for the assessee drew our attention to Page 54 of the Paper Book, being the bank statement of the assessee, wherein the assessee had received a sum of Rs. 39.60 lakhs from sale of immovable property. Accordingly, it was submitted before us that the assessee has duly explained the source of balance investment amount of Rs. 32,96,140/- and therefore, this amount is liable to be deleted.
& 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 10– 23. On going through the case records, we observe that during the impugned year under consideration, the assessee has sold immovable property amounting to Rs. 40 lakhs and the net consideration of Rs. 39,60,000/-, after deduction of tax at source amounting to Rs. 40,000/- has been duly accounted for in the bank statement of the assessee (reproduced at Page 54 of the Paper Book). Accordingly, in light of the facts and supporting documents produced before us, we are of the considered view that the assessee has been able to duly explain the source of investment in the aforesaid property and accordingly, we are of the view that the balance investment of Rs. 32.96 lakhs has been that explained by the assessee. Accordingly, we are of the considered view the addition of Rs. 32.96 lakhs is not liable to be sustained as unexplained investment in the hands of the assessee under Section 69 of the Act since the assessee has duly explained source of investment in purchase of immovable property, as having been sourced out of sale of immovable property, during the impugned year under consideration.
In the result, the appeal of the assessee is allowed.
The Department has raised the following grounds of appeal:
“(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,32,90,000/- made by AO on the account of unexplained sundry creditors. (b) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,32,90,000/- made by AO on the account of unexplained investment in land u/s. 69 of IT Act. (c) The appellant craves leave to add, alter and /or to amend all or any of the ground before the final hearing of the appeal.”
& 1093/Ahd/2023 & 93/Ahd/2024 Late Smt. Ramilaben Harshadrai Patel (Through L/h. Devraj H. Patel) vs. ITO Asst.Year –2016-17 - 11– 26. The Department is in appeal before us against the relief of Rs. 1,32,90,000/- granted by the Ld. CIT(A) with respect to loan taken by the assessee from four parties. On going through the case records, we observe that the assessee had furnished various details of parties viz. their names, addresses, PAN numbers, copy of confirmation, banks statement, ITR-V of all the parties and the relevant bank statement. Accordingly, in light of the elaborate supporting documents produced by the assessee, we find no infirmity in the order of Ld. CIT(A) in granting relief to the assessee by holding that the assessee has been able to prove the genuineness and creditworthiness of the lenders. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.
In the result, the appeal of the Department is dismissed.
In the combined result, the appeal of the assessee is allowed and the appeal of the Department is dismissed. This Order is pronounced in the Open Court on 03/01/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 03/01/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,