Question of source of purchase relevant only for year of purchase not sale-ITAT

Question of source of purchase relevant only for year of purchase not sale. Bank deposits made out of property sold as POA was not unexplained-ITAT

ABCAUS Case Law Citation:
ABCAUS 2293 (2018) (04) ITAT

The appellant assessee had challeneged the order passed by the Commissioner of Income Tax (Appeals) sustaining the addition made by the Assessing Officer (AO) as unexplained fixed deposit.

The assessee was a salaried employee. During the course of assessment proceedings, it was noted by the AO that assessee had made an investment in fixed deposits. Assessee was required to explain the source of such deposit.

Assessee produced a sale deed for sale of one immovable property and explained it as the source of the fixed deposit made. The Assessing Officer on verifying the sale deed found that assessee was only a power of attorney holder (POA) and not the owner of the property., The assessee submitted , that the property sold was acquired by him four years before and he had produced a purchase agreement in this regard. However, the AO disbelieved it as the purchase agreement was not registered and also the assessee could not give any source for the payment of purchase consideration mentioned in such purchase agreement.

Thus, rejecting the explanation given by the assessee for the fixed deposit, the AO made the impugned addition.

Aggrieved, assessee moved in appeal before the Commissioner of Income Tax (Appeals) who however confirmed the addition noting that assessee could not produce any credible source for the payment of consideration claimed to have been paid for purchasing the property which was sold.

The Tribunal observed that there could not be no two opinion that the sum credited in assessee’s bank account was the cheque received on sale of the property. Irrespective of the fact whether assessee, as a power of attorney holder, was entitled to such sum, it could not be controverted that the fixed deposit made by the assessee subsequently thus stood explained.

It was observed that the fixed deposit was placed by the assessee from the very same bank account through a transfer debit. The ITAT opined that It might be true that the power of attorney was registered later and assessee had no good source to explain the payment of purchase consideration for purchase of the property sold. However, source of such payment would be relevant only for the year in which the property was purchased. As far as the instant assessment year was concerned,  the assessee had well explained source for making the fixed deposit.

The ITAT deleted the addition by allowing the respective grounds.