2018 (6) TMI 1117 - AT - Income Tax

Tribunal Decision: Cash Deposits Re-examined, Compensation as Capital Receipt

The Tribunal partly allowed the Revenue's appeal, restoring the issues concerning the unexplained cash deposits to the Assessing Officer for ... Unexplained cash deposited in bank account - Admission of additional evidence - Held that:- The Hon’ble Delhi High Court in the case of Manish Buildwell P. Ltd [2011 (11) TMI 35 - DELHI HIGH COURT] has held that after admitting the additional evidences by the Ld. CIT(A), the evidences should be forwarded to the Assessing Officer for examination by him and for giving rebuttal, if any. Accordingly, relying on the decision of the Hon’ble High Court, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh after providing adequate opportunity of being heard to the assessee. The assessee is at liberty to file necessary evidences before the Assessing Officer in support of its claims. The ground of the appeal is accordingly allowed for statistical purposes. Nature of receipt - compensation received from GAIL - revenue or capital expenditure - Held that:-We note that the amount in question has been received by the assessee from the Gas Authority of India Ltd. (GAIL) by way of compensation to lay underground pipe in the agricultural land of the assessee. This compensation received has been held by the Ld. CIT(A) as capital in nature - Compensation has been received by the assessee for laying underground pipe by the GAIL, thus, respectfully following the above finding of the Tribunal in case of Jagan Nath Prasad, HUF [2015 (10) TMI 240 - ITAT DELHI] we uphold the finding of the Ld. CIT(A) on the issue in dispute. Accordingly, the ground of the appeal of the Revenue is dismissed. Issues Involved:1. Deletion of addition of Rs. 64,00,000/- on account of unexplained cash deposited in bank account.2. Deletion of addition of Rs. 64,00,000/- due to discrepancies in the closing cash balance as per the cash flow statement and balance sheet.3. Deletion of addition of Rs. 4,81,784/- being compensation received from GAIL, treating the receipt as capital in nature.Issue-wise Detailed Analysis:1. Deletion of addition of Rs. 64,00,000/- on account of unexplained cash deposited in bank account:The Revenue challenged the deletion of Rs. 64,00,000/- made by the Assessing Officer (AO) due to unexplained cash deposits in the assessee's bank account. The AO observed cash deposits of Rs. 64,00,000/- in the bank account and made the addition due to non-compliance by the assessee during the assessment proceedings. The assessee later submitted additional evidence, including a cash flow statement and details of a land sale, to the Commissioner of Income-tax (Appeals) [CIT(A)]. The CIT(A) admitted the additional evidence, considered the explanations, and deleted the addition. The Tribunal noted that the CIT(A) failed to forward the additional evidence to the AO for examination and rebuttal, violating Rule 46A(3) of the Income Tax Rules. Citing the Delhi High Court's decision in Manish Buildwell P. Ltd., the Tribunal restored the issue to the AO for re-examination, allowing the assessee to present necessary evidence.2. Deletion of addition of Rs. 64,00,000/- due to discrepancies in the closing cash balance as per the cash flow statement and balance sheet:The AO highlighted a discrepancy between the cash-in-hand reported in the cash flow statement (Rs. 20,05,524/-) and the balance sheet (Rs. 52,26,026/-). The CIT(A) reconciled the difference by considering a registered sale deed of land and other minor entries, concluding that the cash deposits were satisfactorily explained. However, the Tribunal found that the CIT(A) did not forward the explanation and additional sale deed to the AO for verification, again violating Rule 46A(3). The Tribunal restored this issue to the AO for a fresh decision after allowing the AO to examine and rebut the additional evidence.3. Deletion of addition of Rs. 4,81,784/- being compensation received from GAIL, treating the receipt as capital in nature:The Revenue contested the CIT(A)'s decision to treat the compensation received from GAIL for laying an underground pipeline as a capital receipt. The AO had added the amount as revenue receipt due to the lack of justification from the assessee. The CIT(A) considered the compensation as capital in nature, supported by a cheque issued by GAIL's Compensation Department and relying on similar cases like Dr. (Ms.) Avimay S. Haakim and Vijay Ishwar Bhai Desai. The Tribunal upheld the CIT(A)'s decision, referencing a similar Tribunal decision in Jagannath Prasad and Sons HUF, where compensation for laying underground pipelines was held as capital in nature. Consequently, the Tribunal dismissed the Revenue's ground on this issue.Conclusion:The Tribunal partly allowed the Revenue's appeal for statistical purposes, restoring the issues related to the Rs. 64,00,000/- cash deposits to the AO for fresh examination, while upholding the CIT(A)'s decision on the compensation received from GAIL. The decision was pronounced in the open court on 20th June 2018.