2014 (11) TMI 1191 - AT - Income Tax

Addition of renovation expenditure - unexplained investment on renovation of house is liable to assessed to tax - Held that - Once the house does not belong to the Assessee there is no evidence found during the course of the search that the Assessee has invested in the renovation of the house u/s 69 the onus is on the Revenue to prove that the Assessee has made the investment which are not recorded in the books of accounts if any maintained by the Assessee. The house where the renovation has been carried out does not belong to the Assessee. The papers and documents on the basis of which the addition has been made has been found from the house in which not only the Assessee but the family of the Assessee was putting up. The renovation was to be carried out by the person to whom the house belonged. No cogent material or evidence has been brought on record even on the basis of the materials seized that the expenses for renovation have been incurred by the Assessee - onus lies on the Revenue by making the addition to prove that the Assessee had made the investment - if any addition has to be made for the renovation of the house same should be made in the hands of the mother of the Assessee as well as the son of the Assessee to whom the house belongs. We therefore delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Addition made in the hands of the Assessee in respect of renovation expenditure.
2. Charging of interest under sections 234A, 234B, and 234C.

Renovation Expenditure Issue:
The case involved cross-appeals against the CIT(A)'s order regarding the addition of renovation expenditure in the hands of the Assessee. The Assessee's grounds contested the AO's decision to treat the investment by Shri Gaurav Sharma in house renovation as unexplained income. The Revenue's appeal focused on reducing the addition made by the AO. The Tribunal noted that the house did not belong to the Assessee but to Shri Gaurav Sharma, the Assessee's son. The Assessee and Smt. Ramdulari Sharma had disclosed part of the renovation expenditure in their returns for A.Y. 2001-02. The Tribunal found that the AO's addition was based on presumption rather than evidence, as the papers seized were from the house where the Assessee's family resided. The Tribunal held that the onus was on the Revenue to prove the Assessee's investment, which was not done satisfactorily. Consequently, the addition was deleted, and the Assessee's appeal was allowed, while the Revenue's appeal was dismissed.

Interest Charging Issue:
The Assessee's appeal also raised a consequential issue regarding the charging of interest under sections 234A, 234B, and 234C. The Tribunal directed the AO to recompute the interest after considering the decision on the renovation expenditure issue. Ultimately, the Assessee's appeal was allowed, and the Revenue's appeal was dismissed. The Tribunal pronounced the order in accordance with ITAT Rules, 1963.