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Facts
The assessee appealed against an assessment order that made additions for unexplained investments. These additions were related to mutual fund investments made by the assessee's wife and capital gains from the sale of a property, which was jointly owned by the assessee and his wife.
Held
The Tribunal held that the mutual fund investments were made by the assessee's wife from her own bank account and were reflected in her DEMAT account, therefore, the addition in the hands of the assessee was incorrect. Similarly, the capital gains from the sale of the property were also primarily the wife's share, and her share of the capital gains should not have been added in the hands of the assessee.
Key Issues
Whether investments made by the wife from her own funds and capital gains from a jointly owned property can be added in the hands of the assessee.
Sections Cited
147, 144C(13), 69
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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
This appeal by the assessee is directed against the Assessment Order dated 27.01.2025 passed u/s 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (in short “the Act’) for Assessment Year 2018-19.
The assessee in appeal has raised as many as 18 grounds however, the primary issue in appeal is against the addition of Rs. 1,71,95,000/- made on account of unexplained investments u/s 69 of the Act.
Ms. Jasmin Amabadvala, Adv, appearing on behalf of the assessee narrating facts of the case submitted that the assessee is a non-resident. Wife of the assessee Ms. Hutoxi Keki Hathi had purchased Mutual Funds aggregating to Rs. 54 lakhs. The source of making such investment was from the bank account in the name of assessee’s wife. To substantiate her contentions the ld counsel for the assessee referred to IDBI Bank statement which is placed at pages 164 Page | 1 to 169 of the Paper Book. She pointed that the assessee’s wife made investment in the Mutual Funds from her Saving Bank account as under:- Mutual fund Date of investment Amount SBI Magnum Multiplier Fund 12/01/2018 10 lakhs L & T Emerging OPP 15/02/2018 10 lakhs L& T Infrastructure 17/01/2018 10 lakhs L and T Liquid 17/01/2018 24 lakhs Total 54 lakhs
Thus, the total investment of Rs. 54 lakhs was made by the assessee’s wife from her own bank account. The DEMAT account statement of the assessee is at page No. 155 to 160 of the Paper Book. The DEMAT statement clearly reflects the investments made by wife of the assessee. The AO and the DRP have erred in holding investments in Mutual Funds made by assessee’s wife as investments made by assessee.
The ld counsel for the assessee submitted that second addition made by the AO is in respect of capital gain on ½ share in immovable property at Pune. She pointed that wife of the assessee had sold her ½ share in the immovable property at Pune vide agreement to sale dated 31.03.2017. The assessee was also having ½ share in the same very property. The assessee has disclosed his share of capital gains in his return of income. The total stamp value of the property sold as per registered sale agreement dated 31.03.2017 is Rs. 2,55,90,000/-. The entire amount of sale consideration was directly credited to the Capital Gain account on 30.03.2017 in the name of the assessee’s wife. The statement of capital gains accounts is at page 170 of the Paper Book. She pointed that the said capital gain account was solely in the name of wife. The ld counsel pointed that total consideration for sale of property is duly mentioned at page 9 of the said agreement. The ld counsel submitted that the addition has been made in the hands of the assessee in respect of transactions carried out by assessee’s wife. The DRP and AO have failed to considered the submissions and documentary evidence filed by the assessee. In any case no income has escaped assessment as wife of the assessee Mrs. Hutoxi Hathi has disclosed all income and investments in her return of income and has offered the same to tax. She thus prayed for deleting the additions.
Per contra Shri M. S. Nethrapal appearing on behalf of the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee.
We have heard the rival submissions and have examined the orders of the authorities below. The AO has made addition of Rs. 1,71,95,000/- in the hands of the assessee on account of unexplained investments. The said additions are on account of two transactions i.e. investment in Mutual Fund Rs. 54 lakhs and sale of ½ share in immovable property at Pune Rs. 1,17,95,000/-. In respect of investments in Mutual Funds, the assessee has placed on record the bank statement of his wife Mrs. Hutoxi Hathi from where the investments have been made and statement of her DEMAT account. On perusal of the bank statement it is discernible that wife of the assessee on different dates have made investments in Mutual Funds. The investments have already been tabulated above in para 3. The said investments are duly reflected in the Demat account statement of assessee’s wife at page 152 to 160 of the Paper Book. The primary holder of DEMAT account is assessee’s wife and assessee is a secondary account holder. The transaction slip along with statement of account mentions the name of investor as Ms. Hutoxi Hathi. Thus, from the documents placed on record it is clearly evident that the investments in Mutual Funds were made by wife of the assessee and not by the assessee. Thus, the addition of Rs. 54 lakhs in the hands of the assessee on account of undisclosed investment in Mutual Funds is directed to be deleted.
In respect of capital gain from sale of immovable property, we find that the assessee and his wife were joint owners of immovable property at Pune. The said property was sold vide Agreement to Sale dated 31.03.2017 for a total consideration of Rs. 2,55,90,000/-. The sale proceeds were directly transferred to Capital Gain account on 30.03.2017 in the name of wife of the assessee. The Page | 3 statement of Capital Gain Account is at page 170 of the Paper Book. The AO has made addition of ½ share of the capital gains in the hands of the assessee. The contention of the assessee is that the assessee has already offered his ½ share in the capital gains from sale of property to tax. It is assessee’s wife share of capital gain which has also now been added in the hands of the assessee. We find merit in the submissions of the assessee. The assessee’s wife share in the sale of property cannot be added in the hands of the assessee. The documents on record clearly substantiate that the property was held by the assessee in joint name with his wife Hutoxi Hathi. The sale proceeds have been received by the assessee’s wife in her capital gain account. Thus, in light of facts of the case and the documents on record we see no reason to sustain addition of ½ share of the capital gain belonging to the assessee’s wife in the hands of the assessee. The AO has erred in making addition of the investments made by wife of the assessee in assessee’s hand. The said addition is also directed to be deleted. The assessee succeeds on merits.
In Ground No. 7 to 13 of the appeal, the assessee has raised ground assailing assumption of jurisdiction and the re-assessment proceedings being bad in law. Since no submissions were made on these legal issues, they are left open.
In the result, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on 16/10/2025.