AO must prove investment before shifting burden of proof for investment source u/s 69: ITAT

Case Details: Ananthakrishna Vasudev Aithal v. ITO - [2023] 147 taxmann.com 376 (Bangalore-Trib.)

Judiciary and Counsel Details

• • N. V. Vasudevan, Vice President
  • Ganesh R. Ghale, Standing Counsel for the Respondent.

Facts of the Case

Assessee is an individual engaged in the business of outdoor catering. A survey under section 133A was conducted in the business premises of the assessee. The survey was consequent to the information that the assessee purchased an immovable property worth Rs. 90 lakh. During the survey, the assessee declared that he had invested over and above the sum of Rs. 90 lakhs in the purchase of the aforesaid property.

Later assessee submitted that the declaration given at the time of the survey was under pressure and confusion and to buy peace. There was no additional investment in the purchase of the property over and above the sum of Rs. 90 lakhs.

However, during scrutiny, Assessing Officer (AO) referred the matter to District Valuation Officer (DVO). After receiving the report from Valuation Officer, AO made additions to the assessee’s income based on the valuation declared by DVO under section 69 as unexplained income in the property.

The aggrieved assessee preferred an appeal to CIT (A), wherein CIT(A) affirmed the additions made by the AO. The matter then reached the Bangalore Tribunal.

ITAT Held

The Tribunal held that section 69 is applicable where the assessee makes any investment that is not recorded in the books of accounts and further fails to offer any satisfactory reply explanation as to the source of such investment.

To invoke the provisions of section 69, the assessee must have made investments that are not recorded in the books of accounts. The fact that the assessee had made investments should be first proved by the AO and then the burden shifts to the assessee to prove the sources of such investment. Where such investments outside the books of accounts are not proved, the assessee cannot be called upon to prove the sources of investments hypothetically.

In the instant case, the AO had only relied upon the DVO’s report. No other material evidence was furnished by AO that indicates the assessee made investments that are not recorded in the books of accounts. Therefore, the addition made by the AO on the report of the DVO cannot be sustained.

List of Cases Referred to

• • Smt. Amiya Bala Paul v. CIT [2003] 130 Taxman 511/262 ITR 407 (SC) (para 8).