No Addition Is Permitted U/s 69 I-T Act Once Source Of Investment Stands Proved: Mumbai ITAT

On finding that none of requirements of section 69 regarding source of investment stands fulfilled, the Mumbai ITAT upheld the order of CIT(A) deleting the addition made by AO under said provision.

The Bench comprising C.V. Bhadang (President) and B.R. Baskaran (Accountant Member) observed that, “the said section envisages a situation where the assessee has (i) made an investment (ii) which is not recorded in the books of account or (iii) the assessee offers no explanation about the nature/source of the investment or (iv) the explanation offered is not found to be satisfactory. In our view, none of these requirements can be said to be satisfied in this case as the explanation offered is plausible and is clearly borne out of material on record.” (Para 22)

As per the brief facts of the case, the Assessee who is a director of a firm came into an unregistered agreement of a lease. The assessee filed a return which was selected for scrutiny. The assessee produced the unregistered agreement along with bank statement of the firm in order to show that the amount of consideration was paid by the firm and not by assessee in his personal capacity. The AO refused to accept the explanation and made an addition u/s 69.

The CIT(A) deleted the addition made by AO by stating that there is sufficient documentary evidence on record to indicate that the leasehold rights were purchased by the firm and not individually by assessee but AO has proceeded to make the addition on an altogether new ground.

The Coram noted that the amount of consideration was paid from the account of firm to MIDC and the said property has been capitalised in the books of account of the firm.

The Bench observed that it is after the expiry of the lock-in period, the registered Deed came to be executed, in which instead of the firm, the name of its Director (assessee), figured in his individual capacity which appears to be the sole basis of the impugned action.

The Bench further noticed that the respondent had applied for rectification/change of name before the MIDC and the MIDC has approved the assignment from the respondent, in his personal capacity as 'Assignor' to firm as 'Assignee'.

The Bench stated that the CIT(A) correctly found that mentioning of name of assessee in the Deed was by way of a bona fide mistake, which has also been corrected subsequently.

The Coram further observed that none of the requirements listed u/s 69 can be said to be satisfied in this case as the explanation offered is plausible and is clearly borne out of material on record.

Therefore, on finding CIT(A) has correctly deleted the addition, ITAT dismissed the appeal filed by Revenue.

Counsel for Appellant/ Department: Mahita Nair

Counsel for Respondent/ Taxpayer: S.V. Apte

Case Title: Assistant Commissioner of Income Tax verses Rajmohan Appalacharya N. Chakravarty

Case Number: ITA No. 2120/MUM/2023

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