2025 (3) TMI 1271 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - Facts on record reveal that no fresh loan was taken during the year under consideration. In fact neither at the time of assessment proceeding nor during the remand proceeding the AO has been able to identify any entry in the books of accounts reflecting any fresh loan availed by the assessee during the year under consideration. Even the AO is absolutely silent on the aspect whether any amount either in cash or through cheque/draft has been received by the assessee from any person towards unsecured loan in the year under consideration. AO has not brought on record any material to controvert the claim of the assessee that the increase in unsecured loan is on account of book entries made both on the asset and the liability side of the balance sheet on account of purchase of immovable properties. Since the department has failed to bring any material on record to controvert the aforesaid factual position we do not find any infirmity in the decision of first appellate authority in deleting the addition. Hence these grounds are dismissed. Addition made u/s. 69 - unexplained investment in properties - AO has failed to bring on record any evidence to demonstrate that in addition to the initial payment made by the assessee in the assessment year 2014-15 any further payment was made towards the purchase of the properties. The payments to be made is based on various stages of the construction and the construction itself did not proceeded and ultimately the builder/developers closed down its business. There is no reason why the assessee would have made the payment. Thus there being no material on record to establish that the assessee had made the payment we do not find any reason to interfere with the decision of first appellate authority. However as observed by the first appellate authority the assessee did pay the stamp duty and registration charges while entering into the agreement to sale with HDIL. In fact while deciding the issue the first appellate authority has sustained addition to the extent of payment made by the assessee towards stamp duty and registration charges. However while doing so he has omitted to add an amount of Rs. 30, 000/- paid by the assessee towards registration charges of Flat No. B-307. Thus the addition sustained by the first appellate authority has to be enhanced by an amount of Rs. 30, 000/-. Appeal is partly allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the addition of Rs. 1,29,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act was justified.

2. Whether the addition of Rs. 3,20,44,500/- as unexplained investment in properties under Section 69 of the Income Tax Act was justified.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Unexplained Cash Credit under Section 68

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act deals with unexplained cash credits, allowing the Assessing Officer (AO) to add such credits to the income of an assessee if they cannot satisfactorily explain the nature and source.

Court's Interpretation and Reasoning: The Tribunal noted that the AO treated the amount as unexplained cash credit due to the assessee's non-compliance during the assessment proceedings. However, the first appellate authority found that the increase in unsecured loans was due to book entries related to property purchase agreements, not fresh loans.

Key Evidence and Findings: The assessee entered into agreements with HDIL for property purchases, which were reflected in the balance sheet. The increase in liabilities was attributed to these entries, not new loans.

Application of Law to Facts: The Tribunal agreed with the first appellate authority that the entries in the balance sheet were adequately explained and did not represent fresh loans.

Treatment of Competing Arguments: The AO's argument for sustaining the addition was not supported by evidence of fresh loans. The Tribunal found no material to contradict the assessee's explanation.

Conclusions: The Tribunal upheld the first appellate authority's decision to delete the addition of Rs. 1,29,00,000/- under Section 68, as the increase in liabilities was due to book entries for property purchases.

Issue 2: Unexplained Investment under Section 69

Relevant Legal Framework and Precedents: Section 69 of the Income Tax Act pertains to unexplained investments, allowing the AO to add such investments to the income if the assessee cannot satisfactorily explain the source of funds.

Court's Interpretation and Reasoning: The Tribunal noted that the AO made the addition based on AIR information without considering the assessee's explanation and evidence provided during the appellate proceedings.

Key Evidence and Findings: The assessee had agreements with HDIL for properties that were never completed due to HDIL's financial issues. No payments were made during the year except for stamp duty and registration charges.

Application of Law to Facts: The Tribunal found that the assessee's explanation was supported by evidence, including agreements and bank statements showing no payments during the relevant year.

Treatment of Competing Arguments: The AO's claim of unexplained investment was not substantiated by evidence of payments made during the year. The Tribunal found the assessee's evidence credible.

Conclusions: The Tribunal upheld the first appellate authority's decision to delete the addition of Rs. 3,20,44,500/- under Section 69, except for stamp duty and registration charges, which were sustained.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal emphasized the importance of substantiating claims with evidence and the necessity for the AO to provide concrete evidence when making additions under Sections 68 and 69.

Final Determinations on Each Issue:

- The addition of Rs. 1,29,00,000/- as unexplained cash credit under Section 68 was deleted.

- The addition of Rs. 3,20,44,500/- as unexplained investment under Section 69 was deleted, except for the amount related to stamp duty and registration charges, which was sustained with an enhancement of Rs. 30,000/- for omitted registration charges.

In conclusion, the Tribunal partially allowed the appeal, affirming the first appellate authority's decisions with minor modifications.