Property Bought with Family Funds, Not Unexplained Investment: ITAT

The case of the assessee was reopened under Section 147 on 29.03.2018 on the basis of information that she had purchased immovable property despite being a non-filer of returns. A notice under Section 148 was issued, and upon non-compliance with repeated notices, the Assessing Officer completed the assessment ex-parte under Section 144 r.w.s. 147 on 21.12.2018, making an addition of Rs. 1.36 crore as unexplained investment. The assessee became aware of the assessment only after her bank account was attached in 2020, prompting her to file an appeal before the CIT(A), along with a request for condonation of delay.

The assessee, a housewife and senior citizen, submitted documentary proof showing that the property was purchased jointly with her son out of his income, her husband’s funds, and a home loan before the CIT(A). The CIT(A) forwarded the evidence for a remand report from the AO who objected. The CIT(A), however, upheld the addition. Aggrieved by this, the assessee filed the present appeal before the ITAT.

Main Question: When the assessment was finished ex-parte under Section 144 r.w.s. 147, if the Rs. 1.36 crore addition under Section 69C of the Income-tax Act, towards an alleged unexplained investment in an immovable property, was justified.

Tribunal’s Decision: The Tribunal determined that the assessee was not given a fair opportunity during the assessment process. Subsequently, the assessee provided comprehensive evidence to support the source of investment in the jointly held property. The Tribunal noted that the Assessing Officer (AO), instead of verifying the documents during the remand, raised objections based on technical grounds, even though the Commissioner of Income Tax (Appeals) had already accepted their admissibility.

The Income Tax Appellate Tribunal (ITAT) concluded that the assessee had adequately explained the source of the Rs. 1.43 crore investment, which came from bank transfers from her husband and son, along with a sanctioned home loan. As a result, the Tribunal accepted the assessee’s explanation, allowed the appeal, and fully deleted the addition.

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