The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the Revenue’s appeal and upheld the deletion of additions amounting to Rs.2.04 crore made under Section 69 of the Income Tax Act, 1961, after finding that the investments and deposits stood properly explained by the assessee through documentary evidence.

A Bench comprising Vice President Dr. BRR Kumar and Judicial Member Siddhartha Nautiyal upheld the order passed by the Commissioner of Income Tax (Appeals), which had deleted additions relating to property investments, bank deposits and cash deposits made in the hands of non-resident assessee Biharibhai Gokalbhai Patel.

“The provisions of section 69 of the Act contemplate taxation of unexplained investment in the year of actual investment. Therefore, where the evidence on record establishes that the payments were made in earlier financial years, no addition can be sustained in the subsequent year merely because the registration of the property took place later.”

The Assessing Officer had completed the assessment for AY 2016-17 by treating investments in two immovable properties, deposits of Rs 80 lakh in an SBI account and cash deposits of Rs 41.96 lakh in an ICICI Bank account as unexplained investments under Section 69. According to the department, the assessee had failed to furnish supporting evidence regarding the source of funds during assessment proceedings.

Before the CIT(A), the assessee furnished additional evidence, including bank statements, RTGS details, confirmations, cash flow statements and purchase deeds. The assessee contended that payments towards the immovable properties were actually made during Financial Year 2013-14 through banking channels and therefore no addition could be made in AY 2016-17 merely because the sale deeds were registered during the relevant year.

The remand report submitted by the Assessing Officer also acknowledged that payments for the Anand and Valasan properties were made in earlier years through cheque transactions reflected in bank statements. “For invoking section 69 of the Act, the relevant year is the year in which the investment is actually made and not the year in which the asset is registered or documented.”

With regard to the Rs 80 lakh deposited in the SBI account, the assessee submitted confirmations, PAN details and bank statements of lenders from whom amounts were received through RTGS. In respect of cash deposits in the ICICI Bank account, the assessee explained that the amounts represented jewellery sale receipts and agricultural income received under a “santhbhag” arrangement, supported by confirmations, promissory notes and land records.

The Tribunal observed that the department failed to bring any contrary material on record to disprove the documentary evidence furnished by the assessee. It further held that suspicion alone could not justify additions under Section 69 in the absence of an independent inquiry by the Assessing Officer.

The ITAT accordingly held that the CIT(A) had rightly deleted the additions after examining the remand report and supporting evidence furnished by the assessee. The Revenue’s appeal was therefore dismissed.