Valid assessment requires substantiated evidence of investments; reopening based on unexplained sources must be justifiable.

ORDER

Per Saktijit Dey, VP:

The assessee has filed the present appeal challenging the final assessment order passed u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 (‘the Act’ for short), pertaining to the assessment year (A.Y.) 2016-17, in pursuance to the directions of learned Dispute Resolution Panel (‘ld. DRP’ for short).

2. In ground nos. 1 to 3, the assessee has raised certain legal issues challenging the validity of reopening of assessment u/s. 147 of the Act. However, at the time of hearing, parties agreed to proceed on merits. Hence, at the outset, we deem it appropriate to address the issues arising in ground nos. 4 & 5, which are on merits. If warranted, the legal issues raised in ground nos. 1, 2 and 3 would be taken up at a later stage.

3. In ground no. 4, the assessee has contested the addition made of Rs.1,06,56,120/- u/s. 69 of the Act. Briefly stated, the facts are, the assessee is a non-resident Indian. The Assessing Officer (AO), while verifying the insight portal of the department noticed that in the Financial Year (‘F.Y.’. for short) 2015-16, relevant to assessment year under dispute, the assessee, though, had made various financial transactions, however, no return of income was filed by the assessee u/s. 139(1) of the Act. Therefore, having reason to believe that income assessable to tax has escaped assessment, the A.O. initiated proceedings u/s. 147 of the Act, by issuing a notice u/s. 148 of the Act, calling upon the assessee to furnish his return of income. However, as alleged by the A.O., in response to notice issued u/s. 148 of the Act, the assessee did not file any return of income. Subsequently, the assessee furnished a reply before the A.O., stating that he being a resident of United States of America (‘USA’), has no source of income in India. It was submitted, he was sending money through NRE savings accounts for maintenance and investments in India. From the information available on record, the A.O. found that the assessee had invested an amount of Rs.75,22,625/- for purchasing immovable property from Maharashtra Housing and Area Development Authority (MHADA). He further found that the assessee had purchased another property from Neptune Developers for a consideration of Rs.1,47,18,514/- and paid stamp duty of Rs.9,97,700/-. However, he observed, the Stamp Duty Authority has valued the said property at Rs.1,92,73,500/- for stamp duty purpose. Based on such information, the A.O. called upon the assessee to explain the source of investments. Though, the assessee furnished his reply explaining the source of investment, however, the A.O. was not convinced. He treated the investment of Rs.75,22,625/- towards purchase of property from MHADA as well as the amount of Rs.1,56,16,214/- paid to Neptune Developers towards purchase of another property as unexplained investment u/s. 69 of the Act and added back to the income of the assessee while framing the draft assessment order.

4. Contesting the aforesaid additions, the assessee raised objections before ld. DRP.

5. In course of proceedings before ld. DRP, the assessee furnished additional evidences to explain the source of investment in the aforesaid properties. Based on the additional evidences furnished by the assessee and submissions made, ld. DRP directed the A.O. to verify them and furnish a report. After verifying the evidences furnished by the assessee, the A.O. furnished a remand report before ld. DRP. After going through the remand report of the A.O. and the submissions made by the assessee, ld. DRP observed that the assessee was unable to explain the source of investment of Rs.75,22,625/- towards purchase of property from MHADA. The ld. DRP further observed that out of the total