You buy a property, part of which is funded by your husband who stays abroad and remits money in the account of the seller. But the Income Tax Department treats it as unexplained investment and adds it to your taxable income. What do you do?In one such case, a Mumbai woman’s taxable income was increased by Rs 80 lakh after the income-tax department questioned the amount paid towards the purchase of her residential property.The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) decided in her favour of a woman. Read on to know what happened:
What the case is about
According to the I-T department’s ‘Insight Portal’, the woman purchased an immovable property worth Rs 1.4 crore during the financial year that ended on March 31, 2016.The portal monitors high-value financial transactions to help detect instances of tax non-payment. The case was about Section 69 of the Income Tax Act, 1961, which deals with unexplained investments.The information originated from the sub-registrar’s office and was corroborated by data available in the tax deducted at source (TDS) statement relating to the transaction.The woman had not originally filed her income-tax return, proceedings under Section 148A were initiated. She subsequently filed her return.She explained that the investment was funded through proceeds from the sale of an earlier property and financial assistance from her husband who was residing and working in Dubai.During the assessment, the Assessing Officer examined the registered sale deed, Form 26AS and the bank accounts of the woman and the seller. After accounting for TDS of Rs 1.40 lakh, the payment towards the property worked out to Rs 1,38,60,000.The officer accepted payments totalling Rs 58.50 lakh. These included Rs 40 lakh paid on August 12, 2015, and Rs 18.50 lakh paid on August 26, 2015, which were reflected in the woman’s bank account and corresponded with entries in the seller’s account.The remaining Rs 80 lakh was disputed. The woman said her husband had paid the amount directly to the seller through a Dubai exchange bureau in two installments of Rs 40 lakh each. The seller’s bank statement recorded two credits totalling Rs 80 lakh.The Assessing Officer, however, held that this narration did not conclusively establish that the money had originated from the husband. He also noted the absence of remittance advice, exchange bureau records, transfer instructions and bank statements showing the debit from the husband’s account.Consequently, Rs 80 lakh was treated as unexplained investment. A further Rs 10,000 was added as unexplained balance consideration, taking the total addition to Rs 80.10 lakh.The Commissioner of Income Tax (Appeals) upheld the additions. She subsequently challenged the order in ITAT Mumbai and won relief
Why ITAT ruled in favour of the woman
Appearing before the ITAT, the woman argued that she had adequately explained the source of the entire Rs 1.4 crore investment and backed her claim with documentary evidence.She provided a detailed reconciliation of the property’s purchase price, accounting for every component of the payment, including the Rs 80 lakh transferred directly by her husband to the seller.To substantiate her case, she submitted the registered sale deed, the gift deed executed by her husband, his affidavit confirming the payments, bank statements and other relevant documents. These records, she maintained, established the movement of funds and demonstrated that the transaction was genuine.The tribunal examined the documents collectively rather than treating the absence of the original remittance records as decisive. It noted that the purchase, the registered sale deed, the seller’s identity and receipt of the consideration were not disputed.As the order stated: “There is no dispute regarding the purchase of the residential property by the assessee for a consideration of Rs.1,40,00,000/-.”The tribunal also observed that neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) had found the documents submitted by the woman to be false, fabricated or manipulated. The seller’s bank statement showed the disputed credits, while the husband’s affidavit confirmed that he had made the payments on her behalf. His identity documents and income-tax records were also placed before the tribunal.It noted: “These evidences are not isolated documents but interconnected and corroborative pieces of evidence which collectively establish the source and movement of funds forming part of the property transaction.”Another consideration was that the remittance records related to a transaction undertaken nearly ten years earlier. The tribunal found that the authorities had not conducted an inquiry with the seller or gathered adverse material from the bank to establish that the payments represented the woman’s own unaccounted money.The order stated: “More importantly, neither of the authorities has recorded any finding that the documents furnished by the assessee are false, fabricated, manipulated or otherwise lacking in authenticity.”The tribunal held that the explanation could not be rejected merely because one additional piece of corroborative evidence was unavailable when the other documents supported the transaction.It concluded: “Suspicion, however strong, cannot substitute evidence, particularly when the surrounding facts and documentary material overwhelmingly support the explanation furnished by the assessee.”It held that the woman had discharged the burden under Section 69 by establishing the contributor’s identity, financial capacity, source of funds and their use towards the property purchase. The tribunal accordingly directed the Assessing Officer to delete the entire Rs 80.10 lakh addition.The appeal was allowed.
