When AO submitted positive remand report CIT could not have sustained the addition

When  AO submitted positive remand report accepting the genuineness of transaction, CIT(A) ought not to have sustained the addition – ITAT

ABCAUS Case Law Citation:
ABCAUS 2820 (2019) (03) ITAT

The appeal in this case was filed by the assessee against the order of CIT(A) in confirmation of the addition made by the Assessing Officer (AO) as unexplained investment u/s 69 of the Income tax Act, 1961 (the Act).

The assessee was running a proprietary firm. A survey was conducted in which the fact of the assessee having constructed a house transpired.

The assessee, regarding the source of investment submitted that a loan at 75% of the value of plot was taken from the Bank and remaining 25% was contributed out of business income.

The AO accepted such an explanation.

As regards the investment in construction, the assessee submitted that similarly, the construction was made partly by taking a loan and the remaining amount was invested out of business income.

However, since there was no reflection of such business income in the books of account, the assessee, during the survey declared additional income.

However, at the time of filing the return, the assessee made out a claim that such sum was a declared source for which investment was made in construction. It was stated that part of the money was received from his wife out of her HUF’s share and further part amount was withdrawn from business by means of an accounting entry.

However, the AO did not accept the genuineness of transactions and made the addition as above.

The CIT(A) called for the remand report from the AO about the assessee’s explanation of having received amount from genuine and known sources.

The AO tendered his remand report. Not convinced, the CIT(A) sustained the disallowance.

The Tribunal observed that as per the remand report, the family members of the assessee’s wife admitted having given to her the amount in question and all those relatives also stated so in the depositions made before the AO which had not been controverted with any cogent material or evidence. Rather, the AO had himself recorded in the remand report that the affidavit filed could be relied upon.

As regards the source of cash withdrawal, the Tribunal noted that the AO in his remand report had categorically recorded that the fact of withdrawal from the business was verified from the books,

The Tribunal, in view of the remand report submitted by the AO accepting the genuineness of source of investment held that the CIT(A) ought not to have sustained the addition to this extent.

Accordingly the addition was directed to be deleted.

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