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Facts
The assessee's appeal is against the order confirming additions made under Section 69 for Rs. 30 Lacs and assessment of Short-Term Capital Gain (STCG) for Rs. 12.19 Lacs. The addition of Rs. 30 Lacs was for an alleged unexplained investment based on a bank credit, which the assessee claimed as a loan. The STCG calculation involved a denial of claimed cost of improvement.
Held
The Tribunal held that invoking Section 69 for a credit entry representing a loan received was an incorrect assumption of facts and an invocation of the wrong provision of law, making the addition unsustainable. Regarding STCG, the denial of the cost of improvement was based on mere suspicion and doubts without proper verification, which is not permissible.
Key Issues
Whether the addition made under Section 69 for a loan received as an unexplained investment is sustainable. Whether the denial of cost of improvement for STCG calculation is justified.
Sections Cited
69, 153C, 153A, 143(3), 271(1)(c), 69A, 69B, 69C, 69D, 68
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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा)रण वष) / Assessment Year: 2013-14) Shri Sarangabani Kirubakaran DCIT बनाम/ 17/6, First Pillayar Koil Street, Circle-1(2) Vs. Ekkatuthangal, Chennai-600 032. Chennai. �थायीलेखासं./जीआइआरसं./PAN/GIR No. BUMPK-0892-B (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Ms.T.V. Muthu Abirami (Advocate)-Ld.AR � थ�कीओरसे/Respondent by : Shri Nilay Baran Som (CIT) -Ld. DR सुनवाईकीतारीख/Date of Hearing : 25-07-2024 घोषणाकीतारीख /Date of Pronouncement : 04-09-2024 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2013-14 arises out of the common order of learned Commissioner of Income Tax (Appeals)-18, Chennai, [CIT(A)] dated 13-09-2023 in the matter of an assessment framed by the Ld. AO u/s.153C r.w.s. 153A r.w.s. 143(3) of the Act on 31-03-2022. The only grievance of the assessee is confirmation of addition u/s 69 for Rs.30 Lacs and assessment of Short- Term Capital Gain (STCG) for Rs.12.19 Lacs.
The Ld AR advanced arguments and submitted that impugned addition of Rs.30 Lacs u/s 69 represent advance received through banking channels which could not be added u/s 69. This addition does not satisfy the ingredients of Sec.69 since this section is applicable for unexplained investments only. On the issue of assessment of STCG, Ld. AR submitted that the cost of improvement stood proved by documentary evidences and the same could not be disallowed. The Ld. CIT-DR, on the other hand, filed written submissions and submitted that the quoting of wrong section would not vitiate the addition made by Ld. AO as held in various judicial decisions. The copies of the same has been placed on record. The assessment of STCG was also justified. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.
From perusal of para-7.3 of the assessment order, it could be seen that Ld. AO has made impugned addition of Rs.30 Lacs u/s 69 by observing as under: - 7.3 There is a credit of Rs.30,00,000/- in assessee’s bank book which he claims to be “Loan received from Mr Sreejith still pending”. The assessee has not produced any support of his claim such as confirmation from Mr. Sreejith, details of land for which advances is received and contract or agreement or MOU entered into for property transactions. Therefore, in the absence of any kind of evidence, the nature and source in respect of the receipt of Rs.30,00,000/- remains unexplained. Hence, an amount of Rs.30,00,000/- receipt in bank account is treated as unexplained investment u/s 69 of assessee and added to total income of the assessee. Penalty proceedings u/s 271(1)(c) is initiated separately.
The Ld. CIT(A) has confirmed the same.
Quite clearly, Ld. AO has made addition of credit receipt in bank account of the assessee on the ground that the assessee failed to adduce supporting documents. The amount thus received by the assessee has been treated as unexplained investment u/s 69. We are of the opinion that the provisions of Sec.69 are applicable only where the assessee has made investments which are not recorded in the books of account and the assessee offers no explanation about the nature and source thereof. It is crystal clear that same is not the case here. The assessee has not made any investment but it has received certain advance in the bank account. Invoking of wrong provisions of law would vitiate the impugned addition. In such a case, impugned addition would be unsustainable as held by us in assessee’s appeal for AY 2012-13, as under: - 5. The Ld. CIT-DR, in the written submissions, has referred to the decision of Hon’ble High Court of Madras in the case of SVS Oil Mills vs. ACIT (113 Taxmann.com 388). In that case, the assessee was subjected to survey u/s 133A and excess stock was found. The Ld. AO held that excess stock was to be added as undisclosed income of the assessee u/s 69C. It was observed by Hon’ble Court as under: - 7. However, before parting with, we may observe that there is a series of five provisions viz., Section 69-Unexplained investments, Section 69A- Unexplained money, etc., Section 69B-Amount of investments, etc., not fully disclosed in books of account 69C-Unexplained expenditure, etc. and 69D- Amount borrowed or repaid on hundi which have been enacted in the Income Tax Act, 1961 from time to time to bring to tax the undisclosed income either as undisclosed income or the same found during the course of investigation either during the Survey under section 133A or the search operation under Section 132 of the Act or otherwise, investigation or scrutiny during the Assessment proceedings and thus, the unexplained investment or expenses are brought to tax in the form of undisclosed income by making the additions to the extent of such undisclosed income or expenditure straightaway. There is no justification or question of giving the corresponding deduction to the extent of any purchase or source of incurring such expenditure or unexplained investments.
In our opinion, Section 69B providing for amounts of investments in Bullion, Jewellery or other valuable articles (including excess Stocks as well) would have been more appropriate Section to be indicated in the orders passed by the Authorities below rather than Section 69C-Unexplained Expenditure. Nonetheless, we are of the clear opinion that mentioning of wrong section would not upset the Additions made by the Assessing Authorities below in the present case. All these 5 provisions enumerated above have been enacted with a view to bring to tax the unexplained debit balances in the Balance Sheet of the Assessee either in the form of Unexplained Investments, Expenses or Stocks, etc., or unexplained Assets, Money, Bullion, Jewellery, etc., and therefore, such unexplained investments and expenses intended to be brought to tax as Undisclosed Income, these provisions are not only clearly worded but also indicated to plug the loopholes and check the menace of black money. Likewise, unexplained credits in the Balance Sheet are also brought to tax under Section 68 of the Act.
9. In the light of the above, the contention raised by the learned counsel for the Assessee has essentially emanated from a misconception that the Additions made under Section 69B/69C have to be reduced to some extent by giving leverage to the Assessee to claim some deductions from these Additions as well. If the contention of the learned counsel for the Assessee was to be accepted viz., by allowing the purchases corresponding to the alleged excess stock, the Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because such purchases had already been recorded in the books of accounts of the Assessee. Therefore, the excess stock, per se, has to be naturally brought to tax as 'undisclosed income' by itself and there is no question of any corresponding deduction from that in such cases. It has been held by Hon’ble Court that all the 5 provisions as enumerated have been enacted with a view to bring to tax the unexplained debit balances in the Balance Sheet of the Assessee either in the form of Unexplained Investments, Expenses or Stocks etc., or unexplained Assets, Money, Bullion, Jewellery, etc., and therefore, such unexplained investments and expenses are intended to be brought to tax as Undisclosed Income, these provisions are not only clearly worded but also indicated to plug the loopholes and check the menace of black money. Likewise, unexplained credits in the Balance Sheet are also brought to tax under Section 68 of the Act. The said observation, in fact supports the case of the assessee. In the present case, the assessee is a receiver and not the giver and there could be no occasion to held that the assessee has made any unexplained investment. The receipt of loan is nothing but a credit entry which could be taxed u/s 68 and not u/s 69. 6. Another decision as referred to by Ld. CIT-DR is the decision of Mumbai Tribunal in Jignesh Chimanlal Jobanputra (URA No.4008/Mum/2023 dated 18- 04-2024). In that case, the assessee failed to furnish the source of loan obtained by it. The Ld. AO held the same to be non-genuine and made addition u/s 69. It was in that context, the bench observed that the addition could not be deleted for the reason that the section under which the addition is made was mentioned erroneously. The same is not the case here. Here the additions have clearly been made on account of undisclosed investments. The findings of Ld. AO run contrary and there is, in fact, no investment made by the assessee but it is a transaction of receipt of loan by the assessee. It is not the case of mentioning of wrong section. Therefore, this case law also does not support the case of the revenue. 7. The decision of Delhi Tribunal in the case of Smt. Gloria Eugenia Runjah (ITA No.3510/Del/2019 dated 16-08-2023) has been rendered in the context of Sec.68. The assessee contended that it was not maintaining books and cash was found deposited in bank account. Therefore, the provisions of Sec.68 would not apply. The bench observed that the addition could not be deleted merely on technical ground that Ld. AO mentioned Sec.68 instead of Sec.69 of the Act. The present case before is not wrong quoting of Section rather it is a case of receipt of credit in the bank accounts and Ld. AO has gone wrong in appreciating the correct facts. 8. The decision of Hon’ble High Court of Jharkhand in Rajmeet Singh (160 Taxmann.com 83) is a case where the assessee deposited cash in the bank account which was added u/s 68. The Hon’ble Court held that not mentioning the correct provision would not vitiate the addition. The amount so deposited would come within the purview of investment. In the present case, the credit represents receipt of loan through banks.
Therefore, all these decisions do not render any assistance to the case of the revenue. These decisions are contextually distinguishable. In our considered opinion, invocation of wrong provision of law on incorrect assumption of facts would vitiate the impugned addition. Therefore, we would hold the opinion that the impugned addition is unsustainable in law. We order so. No other ground has been urged in the appeal.
Facts being pari-materia the same, taking the same view, we would hold that the impugned addition is unsustainable. We order so. The corresponding grounds stand allowed.
The facts of assessment of STCG are that the assessee sold plots and computed Short-Term Capital Loss (STCL) of Rs.6.20 Lacs. While computing, the assessee claimed cost of improvement for Rs.18.40 Lacs. In support, the assessee furnished a bill dated 24.03.2011 from Lakshmi Construction, Chennai for a sum of Rs.18.50 Lacs which was to carry out earth work, compound wall construction, land filling, gate work etc. The Ld. AO held that the expenditure was prima facie very high. The claim was doubtful since the property was sold for Rs.14.50 Lacs. Therefore, cost of improvement as claimed by the assessee was denied and STCG were computed at Rs.12.19 Lacs. The Ld. CIT(A) confirmed the same. Aggrieved, the assessee is in further appeal before us.
We find that the claim has been denied on mere suspicion and doubts without carrying out any further enquiries or verification. The Ld. AO held that the verification could not be carried out at fag-end of completion of assessment. However, even no verification has been done at first appellate stage. Once the assessee has furnished sufficient documentary evidences to lay claim on a deduction, the same has to be rebutted by contrary evidences which is not done in the present case. It is trite law that no addition could be made on mere suspicion and doubts. Therefore, the claim of cost of improvement as made by the assessee has to be accepted. We order so.
The Ld. AR has raised legal issue on jurisdiction u/s 153C which has been rendered mere academic in nature. We refrain from dealing with the same. 8. The appeal stand allowed in terms of our above order. Order pronounced on 4th September, 2024 Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा45 / VICE PRESIDENT लेखा सद7 / ACCOUNTANT MEMBER चे9ई Chennai; िदनांक Dated :04-09-2024 DS आदेशकीKितिलिपअ%ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयुA/CIT Chennai. 4. िवभागीय�ितिनिध/DR 5. गाडFफाईल/GF