TMI Blog2023 (6) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... voking deeming provisions, it was incumbent on the Assessing Officer, to bring on record material evidences which canbe said to lead to the satisfaction of the AO while making requisite investigations or adopt suchother means permissible in law at his comment. AO having not discharged onus for proving the satisfaction of the condition for application of deeming sections, he cannot invoke provisions of section 69 - As already stated by us in the earlier part of this order, the assessee has discharged primary onus and proved source for purchase of property. In this case, the assessee has discharged burden of proof by filing details of loans taken from Mr.S.V.Ranga Reddy, and also drawings from M/s.SVR Construction Co., by filing necessary details, including relevant ledger account copies through parties in their respective accounts, bank statements of partnership firm, and Mr.S.V.Ranga Reddy and also confirmation letters from the parties along with their ITR filed copies for the relevant assessment year. From the above, it is abundantly clear that the explanation offered by the assessee with regard to source for purchase of property is genuine transaction, which is supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for the AY 2013-14 on 31.10.2014 admitting total income of Rs. 80,000/-. Information available with the Department shows that the assessee had purchased an immovable property for Rs. 3.40 Crs. during the FY 2012-13 relevant to assessment year and market value of the property is at Rs. 7.70 Crs. To verify the source for purchase of property, the assessment has been re-opened u/s. 147 of the Income Tax Act, 1961 (in short the Act ) and notice u/s. 148 of the Act, dated 28.03.2018 was issued and served on the assessee. In response to the notice issued u/s. 148 of the Act, the assessee vide letter dated 10.12.2018 submitted that the return filed on 31.10.2014 may be treated as return filed in response to notice issued u/s. 148 of the Act, and also asked for the reasons for re-opening of assessment. The reasons for reopening of assessment was furnished to the assessee. During the course of assessment proceedings, it was noticed that the assessee has purchased property for a consideration of Rs. 3.40 Crs., and thus, the AO called upon the assessee to explain source for purchase of property. In response, the assessee submitted that she had received unsecured loan of Rs. 1.40 Crs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partnership firms referred above did not file their Returns of income. Assessee had not substantiated the above claim by furnishing relevant financials of the firms. She had just furnished copies of above stated work orders and bank statements. Assessee could not place proof to show source of funds and creditworthiness of donors was not proved. In the absence of material evidence, source for withdrawal made by the assessee to the extent of Rs. 2 Crores from the above referred partnership firms remained unexplained. It is trite law that the initial burden of proving is always on the assessee to show that the property transactions was made out of disclosed sources. Thus the assessee had not discharged burden as regards source from which investment to the extent of Rs. 2 Crores had been made. c.1. Further, vide letter dated 26.12.2018, it was submitted that Shri. S.V.Ranga Reddy on receipt of amount to the extent of Rs. 1 Crore by Venkatshiva from M/s. SVRC on 27.05.2010 21.12.2010, had given Rs. 1 Crore directly to the seller. However, on 28.12.2018, it was submitted that the aggregate sum of Rs. 1,40,00,000/- shown by the assessee as part of the purchase consideration, had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented unaccounted income of the assessee, as the same was not disclosed by her in the returns of income. Onus is on the assessee to prove the source of amounts and merely by furnishing copy of bank statements does not shift the onus to the Department. Assessee had not discharged burden as regards source from which investment had been made. Since no plausible explanation has been furnished about the investment in the purchase of immovable property and stands clearly establishes that the investment in the property has been made by the assessee herself which was nothing but clearly the undisclosed source and accordingly the addition under section 69 to the extent of Rs. 3,40,00,0007- is made as unexplained investment and the same is added back to the returned income of the assessee for the AY.2013-14 as under. Accordingly, the assessment is completed as under: Income from other sources (As admitted) Rs. 1,86,870 Add:Un explained investment u/s. 69(as discussed vide Para Nos.12 13) Rs. 3,40,00,000 Income Rs. 3,41,86,870 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 for Rs. 50.00 lakhs, another cheque No. 466157/21.12.2010 for Rs. 50.00 lakhs and another No.000040/24.01.2013 for Rs. 40.00 lakhs aggregating to Rs. 1,40,00,000/- from her husband S.V. Ranga Reddy and the sum of Rs. 2,00,00,000/- paid as part of sale consideration for purchase of the property had been met out of the drawings from the aforementioned partnership firms and that the appellant being the managing partner of the partnership firm viz., M/s. SVR Construction Company, during the year ending 31.03.2013 had also drawn about Rs. 190.00 lakhs from the firm whose source was contract receipts. 7.1. The aggregate sum of Rs. 1,40,00,000/- shown by the assessee as part of the purchase consideration, had been paid by the assessee's husband, Mr. S.V. Ranga Reddy directly to the seller Mr. D.S. Reddy and in the Balance Sheet as at 31.03.2011 of Mr. S.V. Ranga Reddy the sum of Rs. 1,00,00,000/-paid had been shown against D.S. Reddy in the schedule 'Current Assets, Loans Advances'. This amount was transferred to the assessee on 01.04.2011 the balance sum of Rs. 40,00,000/- 24.01.2013 paid to Mr. D.S. Reddy had been transferred to the account of the assessee. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a partner: - M/s. SVR Construction company; - M/s. Vinayak Infra Projects and it was seen that M/s. SVR Construction Company executed contract works only during the first year of its existence i.e. F.Y. 2010-11 and since its client (from whom the appellant had obtained work) got into legal trouble and the contract work had to be abandoned and since it resulted in heavy losses and in the absence of any other profitable activity, this firm did not file any income tax returns during the impugned year. 8.1. Similarly M/s. Vinayak Infra Projects filed its return of income for the first year of its existence i.e. A.Y. 2011-12 on 31.12.2011 and a copy of the return filed acknowledgment along with financial statements for that year were enclosed which also showed losses thereby not filing the return of income. 9. Therefore the AO's contention that the withdrawals of Rs. 2.00 crores by the appellant from the partnership firms remained unexplained merely because those firms did not file their returns was not a valid inference since they were separate legal and taxable entities under the Act and she ought to have confined herself to the genuineness of the sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.1. The Hon'ble Supreme Court in CIT vs. Smt. P.K. Noorjahan (1999) 237 ITR 570 (has held that the language used in the deeming provisions of Sections 68 to 69C, is may and not shall and hence significant amount of discretion has been vested with the AO which has to be judicially exercised. In the case of the assessee, under consideration, the assessee urges that the principles laid down by the Supreme Court in the above decision were not followed since the entire expenditure/investment were presumed and assessed by the AO as unexplained in the hands of the appellant, that too, without bringing any corroborative evidence on record to substantiate such presumptions and suspicions which is clearly not tenable and the onus is on the Revenue to prove on the strength of evidence that the impugned expenditure was not genuine or legitimate which is cardinal principle of jurisprudence. Further, in Mirah Exports (P) Ltd. vs. Collector of Customs (1998) 3 SCC 292 (SC) it was observed that the burden of proving a charge lies upon the Revenue and the Revenue has to produce necessary evidence to prove the said charge. Ordinarily, the Court should proceed on the basis that the apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant pieces of evidence as it is again in the instant case particularly in relation to the investment mentioned supra is an error in law as held in Bhagwati Prasad Misra v CIT 35 ITR 97 (Ori). 12. It has been pertinently held in the case of Divine Leasing and Finance Ltd. 299 ITR 268 (Del) that where the preponderance of evidence indicated absence ofculpability and complicity of the assessee it should not be harassed by the Revenue insistence that it should prove the negative and further that a delicate balance must be maintained while walking the tight rope of Section 69 of the IT Act. 12.1. As already stated earlier the primary onus even though discharged by the appellant in the instant case but since the Assessing Officer has not been able to establish that the transactions are not genuine and hence the addition of the investment purportedly made u/s 69 of the Act is not legally tenable in view of the ratio of the judicial precedents quoted supra and therefore directed to be deleted. 5. The Ld.DR, Mr. AR.V.Sreenivasan, Addl.CIT, submitted that the Ld.CIT(A) erred in not appreciating the fact that the partnership firm from where the assessee claims to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm has been debited to partners capital account as drawings. The assessee had also filed ledger extract of partners account in the books of firm to prove that money has been received from the firm. Further, if you go through payments made by cheque by Mr.S.V.Ranga Reddy to seller and cash withdrawals from partnership firm, the date of payment by cheque and cash withdrawals from partnership firm had same dates which clearly prove that the assessee has withdrawn money from bank account of partnership firm, and paid to seller for purchase of property. From the above, it is very clear that there is an enough source for purchase of property, and thus, question of making addition towards purchase of property as unexplained investment u/s. 69 of the Act, does not arise. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO, and their orders should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The provisions of Sec.69 of the Act deals with unexplained investment, and as per said provisions, where in the Financial Year immediately preceding assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmation letters from Mr.S.V.Ranga Reddy, bank statements and also IT return filed by the creditors for the relevant assessment year to prove identity, genuineness of the transactions and creditworthiness of the parties. From the details filed by the assessee, we find that Mr.S.V.Ranga Reddy, has paid a sum of Rs. 50 Lakhs by Cheque No.451311 dated 27.10.2010 drawn on Andhra Bank to Mr.D.S.Reddy, the seller of the property and said information is available in the recitals of Sale Deed dated 04.03.2013. Mr.S.V.Ranga Reddy had paid a sum of Rs. 50 lakhs by Cheque No.466157 dated 21.12.2010 and another Rs. 40 lakhs through RTGS from Andhra Bank A/c to HDFC Bank account of the sller Mr.D.S.Reddy. All three payments have been made through proper banking channel. Further, the assessee had also proved source of income by filing necessary evidences, including ledger extract of M/s.SVR Construction Co., and Mr.Venkateswara Engineering Works along with their bank statements to prove, Mr.S.V.Ranga Reddy drawn funds from partnership firm before making payments to Mr.D.S.Reddy, the seller of the property. Further, Mr.S.V.Ranga Reddy, has filed confirmations and confirmed the transactions where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the claim of the assessee only for the simple reason that the firm did not file return of income for the relevant assessment year. In our considered view, when evidences filed by the assessee clearly shows that there is enough source for partnership firm to explain drawings of the partner, then, non-filing of return of income by the firm, cannot be a reason to reject explanation of the assessee for explaining source for purchase of property. In this case, the AO has rejected explanation furnished by the assessee only on the ground that the assessee has filed certain evidences to prove source for purchase of property and such claim is an afterthought. But, fact remains that when the AO is invoking deeming provisions, it was incumbent on the Assessing Officer, to bring on record material evidences which canbe said to lead to the satisfaction of the AO while making requisite investigations or adopt suchother means permissible in law at his comment. The AO having not discharged onus for proving the satisfaction of the condition for application of deeming sections, he cannot invoke provisions of section 69 of the Act. As already stated by us in the earlier part of this order, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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