ITAT allows appeals, deletes tax additions based on suspicion. Assessee's explanations deemed sufficient.

The ITAT allowed the appeals of the assessees, directing the deletion of additions made by the tax authorities. The ITAT found that the assessee adequately explained the sources of the deposits and concluded that the tax authorities' determinations were based on suspicion, conjectures, and biases. The order was pronounced in the Open Court on 13th July 2020.

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Issues Involved:
1. Determination of total income.
2. Addition of unexplained cash credit under section 68.
3. Validity of affidavits and statements as evidence.
4. Consideration of surrounding circumstances and human probability.
5. Nature of cash received as consideration for the sale of agricultural land.
6. Requirement for the assessee to explain the source of the creditor's source.
7. Applicability of the judgment in CIT v. Durga Prasad More.
8. Basis of the addition on surmises, conjectures, and suspicion.
9. Fair and proper opportunity and principles of natural justice.
10. Levy of interest under sections 234A and 234B.

Detailed Analysis:

1. Determination of Total Income:
The CIT(A) upheld the determination of the total income of the appellant at Rs. 42,84,650/- against the declared income of Rs. 2,84,650/- for the assessment year 2016-17. The assessee argued that the addition of Rs. 40,00,000/- representing alleged unexplained cash credit was misconceived and arbitrary.

2. Addition of Unexplained Cash Credit under Section 68:
The CIT(A) upheld the addition of Rs. 40,00,000/- as unexplained cash credit under section 68 of the Act. The assessee contended that the cash received was against the sale of agricultural land, and the addition was not justified. The AO's concerns included the long time lag between the agreement and registration, the authenticity of the agreement, and the purchasers' ability to arrange funds.

3. Validity of Affidavits and Statements as Evidence:
The CIT(A) concluded that "affidavits and statements are self-serving documents and cannot be accepted fully if they are contradictory to circumstantial evidence." The assessee argued that the affidavits and statements were valid and corroborated by other evidence, including the purchasers' statements and the Compromise Deed.

4. Consideration of Surrounding Circumstances and Human Probability:
The CIT(A) found that "the whole transaction in both cases now clearly comes out as perfectly orchestrated and the story of the assessee is to be judged on the test of human probability and the documents are to be seen with reference to the surrounding circumstances." The assessee argued that the transaction was genuine and supported by evidence, including the Compromise Deed before the Panchayat.

5. Nature of Cash Received as Consideration for Sale of Agricultural Land:
The assessee contended that the cash received represented consideration for the sale of agricultural land and should not be taxed as income. The CIT(A) did not accept this explanation, citing concerns about the authenticity of the agreement and the purchasers' ability to arrange funds.

6. Requirement for the Assessee to Explain the Source of the Creditor's Source:
The assessee argued that it is not required to explain the source of the creditor's source, citing the settled position of law. The CIT(A) did not accept this argument, focusing on the purchasers' inability to provide documentary evidence for their sources of funds.

7. Applicability of the Judgment in CIT v. Durga Prasad More:
The CIT(A) relied on the judgment in CIT v. Durga Prasad More, which the assessee argued was inapplicable to their case. The assessee contended that the transaction was between strangers, not a family arrangement, and the source of the source should not be scrutinized.

8. Basis of the Addition on Surmises, Conjectures, and Suspicion:
The assessee argued that the addition was based on surmises, conjectures, and suspicion, without any contrary evidence. The CIT(A) upheld the addition, citing concerns about the authenticity of the agreement and the purchasers' ability to arrange funds.

9. Fair and Proper Opportunity and Principles of Natural Justice:
The assessee claimed that the assessment was made without granting a fair and proper opportunity, violating the principles of natural justice. The CIT(A) did not address this argument in detail.

10. Levy of Interest under Sections 234A and 234B:
The CIT(A) upheld the levy of interest under sections 234A and 234B, which the assessee argued was not justified based on the facts of the case.

Conclusion:
The ITAT found that the assessee had adequately explained the sources of the deposits and that the tax authorities' conclusions were based on suspicion, conjectures, and biases. The ITAT directed the deletion of the additions, allowing the appeals of the assessees. The order was pronounced in the Open Court on 13th July 2020.

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