Wife share in house purchased from savings and stridhan accepted by deleting addition made u/s 69B as unexplained investment – ITAT
ABCAUS Case Law Citation:
ABCAUS 1240 (2017) (05) ITAT
The appellant assessee was aggrieved by the order passed by the CIT(A) in confirming the disallowance made by the Assessing Officer (‘AO’) u/s 69B of the Income Tax Act, 1961 (‘the Act’) ignoring that 50% of the amount was invested by the wife of assessee.
Assessment Year : 2009-10
Date/Month of Pronouncement: May, 2017
Brief Facts of the Case:
The assessee had declared an income of Rs. 1,84,410/- from petty business activities wherein books of accounts had not been maintained. The AO required the assessee to explain the investment of Rs.15 lacs in the purchase of house property. The assessee stated that the property in question was purchased jointly with his wife as per copy of deed filed. As regards source of investment made in the property, the assessee submitted that the house property was in joint name and wife of the assessee had contributed 50% i.e.; Rs.7,50,000/- cash out of past savings and current years income/capital.
The AO did not believe the explanation furnished and concluded that the explanation was not substantiated and remain unexplained. Consequently the AO made addition of Rs.15,00,000/- u/s 69B as unexplained investment in the hand of the assessee and initiated penalty proceedings u/s 271(l)(c) separately.
In appeal before the First appellate authority (FAA) which was CIT(A), the assessee submitted that the purchase of the said property had been financed by a housing loan of Rs. 20 lacs. The house was purchased in the joint name alongwith his wife. It was accepted that payment of Rs. 15 lacs was made in cash however, the assessee paid only Rs. 7.5 lacs from available sources and the remaining 50% was paid by his wife who too was a tax payer over the years i.e. F.Y. 2002-03 onward. Her share of the payment was made by her savings out of her income and Stridhan etc. Apart from that it was also argued that since both the husband and wife were running petty business and continuously filed income tax returns and as per chart filed and had been regularly making drawings for expenses over ten years and also had savings in the form of cash of the assessee and his wife from FY 2001-02 till FY 2007-08. However, the arguments and submissions did not find favour with the CIT(A) who confirmed the addition .
Aggrieved with the order of the CIT(A), the assessee was in appeal before the ITAT.
Contentions of the appellant assessee:
The assessee challenged the conclusion of the CIT(A) stating that the explanation offered had been arbitrarily rejected and ignoring the fact that admittedly both the husband and the wife had regularly been assessed to tax over the years. Thus the insistence of the department to sustain the entire addition in the hands of the assessee it was not justified. Part of the investment had been made by the assesse’s wife who was on independent assessee in her own right.
Observations made by the Tribunal:
It was found that the CIT(A) had failed to give any finding as to why the explanation of the assessee that half the funds for meeting the cost of investment of Rs.7. 50 Lacs was financed by his wife should not be accepted.
It was observed that as per the findings of the CIT(A), the assessee’s wife was also returning income from petty business and this fact has been accepted by the CIT(A) also. It was a fact that the bank before advancing the loan necessarily has seen the assessee and his wife’s capacity to repay back the loan with interest over the years based on their liquidity position and past savings. However the CIT(A) had doubted the fact as to how the concerned lady could have such high savings to the extent claimed. It was presumed by him based on no fact that the drawings and savings necessarily must have been spent elsewhere. However no material had been relied upon to dismiss the claim of the assessee. The finding of the CIT(A) did not make any reference to any supporting fact or evidence and thus was open to the challenge of being arbitrary and thus unsustainable.
The Tribunal touched upon the socio-economic realities and aspirations of a lower middle-class or middle-class Indian family and opined that the explanation offered consistently before the tax authorities supported by evidence should had been considered keeping in mind the socio-economic realities and aspirations of a lower middle-class or middle-class Indian family to purchase and own at least one residential house during their life time.
It was further observed that the emotional decision taken to fulfill this overwhelmingly compelling need of owning at least one family residential house at times is often not a decision based on sound prudent financial planning. Like decisions of Indian families often to rashly overspend on marriages of children as a status symbol to impress the society. The decision to buy a family home are equally emotional decisions driven by family pride. The reality of this social dictum of false status boosting family pride can be well understood in the context of the social mileu where repeatedly Indian families, at times willingly still put themselves in crippling financial indebtedness against all sound financial advise towards this so called necessary wish fulfillment.
The Tribunal opined that the tax authorities could not blindly dictate what the earning couple should necessarily save, the tax authorities are expected to be alive to the needs and expectations of aspirational India where both spouses are willing to earn and save making sacrifices on a personal level in order to contribute to fulfilling their life’s dream of owning a family house. The wife too can be an equal contributer from her own life savings and earnings. In such a scenario, the explanation offered that the wife who admittedly was a taxpayer for over 5 years and as per the consistent explanation before the tax authorities, she accepted and acknowledged that she gave her entire life savings including Stridhan, should have been considered and accepted keeping the realities of the social mileu to which the taxpayer belonged. If the explanation still had to be rejected it should have been rejected on facts and evidences. The explanation could not have been outrightly rejected without ascribing any reasons whatsoever.
The ITAT found that the property as per record was in the joint name of the husband and wife and the bank loan was also in their joint name. It opined that the explanation of the taxpayer that half of the amount was paid by his wife where she was an independent taxpayer in her own right deserves to be accepted and consequently the assessee in those peculiar facts and circumstances could not be saddled with the addition of Rs. 7.50 which had been owned up by the wife. Accordingly the ITAT accepted the explanation that the wife contributed Rs. 7.50 Lacs from her past savings and her Stridhan.
Qua the remaining amount of Rs. 7.50 lacs the issue was remanded and set aside back to the file of the CIT(A) with direction to examine the taxpayer’s claim in regard to the payment of Rs.7.50 Lacs by the assessee out of his past savings.
The impugned order to for a limited extent set aside back to CIT(A) with the direction to pass a speaking order in accordance with law. . The explanation qua his wife for the remaining portion for the reasons given hereinabove was accepted.