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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SMT DIVA SINGH
ORDER The present appeal has been filed by the assessee assailing the correctness of the order dated 26.08.2014 of CIT(A), Ghaziabad pertaining to 2009-10 assessment year on the following grounds:-
1. “The AO treated full amount of Rs.15,00,000/- which has been paid against purchase of housing in joint name, as unexplained investment and addition made accordingly for Rs.15,00,000/-.
2. The AO had ignored the fact that purchase of house made in joint name and by ignoring this fact all the payment in cash for Rs.15,00,000/- treated as made by the assessee.
3. The AO had ignored that the both purchaser of residential house was having NIL capital on the date of purchase. The assessee and his wife are income tax payer from last 10 years and savings out of Income/Stridhan treated NIL.
4. The AO erred in law by treating all payment in cash have been made by the assessee while 50% of Rs.15,00,000/- i.e. Rs.7,50,000/- made by wife of assessee. Payment made by the wife not to be treated as payment made by the assessee u/s 69B.
5. The assessee request to relief by deleting the demand on addition of Rs.15,00,000/- u/s 69B.
6. The AO has erred in initiating penalty proceedings u/s 271(1)(c) of the Act.
7. That the Appellant craves the right to amend, append, delete, enhance, and add any or all ground of appeal before or at the time of hearing of appeal.”
2. Both the parties have been heard. The record shows that the assessee declared an income of Rs.1,84,410/- from petty business activities wherein books of accounts have not been maintained. The AO required the assessee to explain the investment of Rs.15 lacs in the purchase of house property. The assessee initially was represented by Sh. S.C.Jain, CA thereafter on 12.12.2011 by Sh. Rajeev Kumar, CA. Addition of Rs.15 lacs was made by the AO by an order dated 29.12.2011 u/s 143(3) holding as under:- 2. “On 12.12.2011 Shri Rajiv Kumar, CA attended the proceedings and filed power of attorney and on adjourned date on 15.12.2012 filed written submission and during the course of confrontation the counsel of the assessee stated that the property in question of purchased jointly with his wife as per copy of deed filed and disclosed the source of investment. As regards source of investment made in the property by his wife, source of income could not be furnished and seems to be colourable device to explain the source of investment in property. For source of Rs.7,50,000/- cash, investment by assessee, it is stated that it is out of past savings and current years income/capital. However, the averment has not been supported by any documentary evidence. The evidence of neither opening capital nor current capital has been furnished. It is stated in the reply that 'details of working of availability of this cash of Rs.7,50,000/- is assessed' but no such annexure has been enclosed. Hence, the arguments put forth by the assessee to explain the source of cash payment of Rs.15,00,000/-plus stamp duty Rs.2,35,000/- Plus registration charges Rs.10,000/- are not substantiated and remain unexplained. Considering the reply of the assessee and confrontation during the course of proceedings an addition of Rs.15,00,000/-is made in his income. (Issue penalty notice u/s 271(l)(c) separately) Addition of Rs.15,00,000/- The income of the assessee is computed as under:- Net Income as shown Rs.184410/- Add: as per para-2 above. Rs.15,00,000/- Total income Rs.1684410/-' Assessment for A.Y. 2009-10 is completed on the income of Rs.1684410/- against returned income of Rs.184410/-. Issue notice of demand and challan. Charge interest u/s 234A/B/C as per rule. Issue penalty notice u/s 271(l)(c) & 271(l)(b).”
3. In appeal before the First appellate authority, the assessee submitted that the purchase of the said property had been financed by a housing loan of Rs.20 lacs. The house was purchased in the joint name alongwith his wife Smt. Munesh. It was accepted that payment of Rs.15 lacs was made in cash however, the assessee paid only Rs. 7.5 lacs from available sources and the remaining 50% was paid by his wife who too was a tax payer over the years i.e. F.Y. 2002-03 onward. Her share of the payment was made by her savings out of her income and Stridhan etc. Apart from that it was also argued that since both the husband and wife were running petty business and continuously filed income tax returns and as per chart filed and had been regularly making drawings for expenses over ten years and also had savings in the form of cash of the assessee and his wife from FY 2001-02 till FY 2007-08. The supporting evidences were claimed to have been attached in support of the explanation before the CIT(A) relying on which it was submitted that the investment was thus fully explained. However, the arguments and submissions did not find favour with the CIT(A). Aggrieved the assessee is in appeal before the ITAT.
4. Ld.AR assailed the conclusion of the CIT(A) stating that the explanation has been arbitrarily rejected and ignoring the fact that admittedly both the husband and the wife have regularly been assessed to tax over the years. Thus the insistence of the department to sustain the entire addition in the hands of the assessee it was submitted is not justified. Part of the investment it was submitted has been made by the assesse’s wife who is on independent assessee in her own right.
Ld.Sr. DR relied upon the impugned order.
I have heard the rival submissions and perused the material available on record. On a consideration of the peculiar facts and circumstances of the case, I find that the Ld. CIT(A) has failed to give any finding whatsoever as to why the explanation of the assessee that half the funds for meeting the cost of investment of Rs.7. 50 Lacs was financed by his wife should not be accepted. Admittedly the assessee consistently has taken the stand that the residential house was jointly purchased by the husband and the wife. The record shows that in support of the claim the assessee has submitted the evidence to show that his wife has also been a taxpayer for almost 5 years prior to the purchase of this house. On a consideration of the findings of the Ld. CIT(A), it is seen that the assessee’s wife Smt.Munesh was also returning income from petty business and this fact has been accepted by the Ld.CIT(A) also. It is a fact that the bank before advancing the loan necessarily has seen the assessee and his wife’s capacity to repay back the loan with interest over the years based on their liquidity position and past savings. However the CIT(A) has doubted the fact as to how the concerned lady could have such high savings to the extent claimed. It is presumed by him based on no fact that the drawings and savings necessarily must have been spent elsewhere. However no material has been relied upon to dismiss the claim of the assessee. It is seen that the finding under challenge makes no reference to any supporting fact or evidence and thus is open to the challenge of being arbitrary and thus unsustainable. I am of the view that the explanation offered consistently before the tax authorities supported by evidence should have been considered keeping in mind the socio-economic realities and aspirations of a lower middle-class or middle-class Indian family to purchase and own at least one residential house during their life time. The emotional decision taken to fulfill this overwhelmingly compelling need of owning at least one family residential house at times is often not a decision based on sound prudent financial planning. Like decisions of Indian families often to rashly overspend on marriages of children as a status symbol to impress the society. The decision to buy a family home are equally emotional decisions driven by family pride. The reality of this social dictum of false status boosting family pride can be well understood in the context of the social mileu where repeatedly Indian families, at times willingly still put themselves in crippling financial indebtedness against all sound financial advise towards this so called necessary wish fulfillment. The tax authorities cannot blindly dictate what the earning couple should necessarily save, the tax authorities are expected to be alive to the needs and expectations of aspirational India where both spouses are willing to earn and save making sacrifices on a personal level in order to contribute to fulfilling their life’s dream of owning a family house. The wife too can be an equal contributer from her own life savings and earnings. In such a scenario, the explanation offered that the wife who admittedly was a taxpayer for over 5 years and as per the consistent explanation before the tax authorities, she accepted and acknowledged that she gave her entire life savings including Stridhan, should have been considered and accepted keeping the realities of the social mileu to which the taxpayer belonged. If the explanation still had to be rejected it should have been rejected on facts and evidences. The explanation could not have been outrightly rejected without ascribing any reasons whatsoever. On consideration of the material available on record, I find that the explanation of the taxpayer that half of the amount was paid by his wife where she was an independent taxpayer in her own right deserves to be accepted and consequently the assessee in those peculiar facts and circumstances cannot be saddled with the addition of Rs. 7.50