2021 (2) TMI 943 - AT - Income Tax

Tribunal directs deletion of additions under Section 68 Income Tax Act, emphasizes natural justice

Shri Vishnu Prasad Versus D.C.I.T. Circle-7, Jaipur.

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the additions of Rs. 30,50,000/- and Rs. 15,00,000/- made under ... Addition u/s 68 - Cash deposits in bank account as undisclosed income - Non reply to summons by debtors - HELD THAT:- As total cash deposits of ₹ 45,50,000/- appearing in the bank statement, as stated above, ₹ 15,00,000/- was explained as received from Shri Hanuman. The assessee had paid this amount to him as an advance against purchase of his land in FY 2004-05. Later due to some disputes with the title of the said land the deal could not materialize, and the advance paid, remained receivable from Shri Hanuman. This amount duly appeared in the assessee’s balance sheet as on 31.03.2005 - This transaction was further substantiated by filing the duly notarized ‘sale agreement’, entered into between the assessee and Shri Hanuman. The said amount was recovered in the year under appeal and the same was explained as being deposited in cash by the assessee. Since Shri Hanuman was not co-operating, the assessee had filed an affidavit of one of the witnesses to the sale agreement, who had confirmed on oath that, the said sum of ₹ 15,00,000/- was received from Shri Hanuman, by the assessee. In the case of the assessee, (i) the identity of Shri Hanuman remains undisputed, as the summons issued by the AO was duly served upon him, (ii) genuineness of the transaction is also proved (from books of accounts) beyond doubt, as amount paid as advance to him, duly appeared in the balance sheet of the assessee since FY 2004-05, as also the agreement to sale, that duly substantiates the transaction was available on records. As far as the third condition is concerned, it is submitted, that the assessee had not received any loan/ advance from him, but had only recovered his own money, thus, capacity is not the issue involved. Thus, all the conditions envisaged above are completely satisfied by the assessee. Section 68 makes it clear that in respect of a cash credit entry the explanation offered by the assessee can be rejected by the Income tax Officer only on cogent grounds, that is, only if such grounds are not based upon any evidence and the assessee has filed complete evidences for the explanation offered by it, and the sole reason to reject the assessee’s explanation, was that the persons did not appear in person for the assessment proceedings. Your honors would appreciate the fact in such kind of land deals, normally advance paid is never returned and Sh. Hanuman was also not willing to repay advance taken by him and assessee had to put continuous efforts and follow up to persuade him to pay back money (which was eventually received in installments) and he was not in good terms with assessee for this reason. In such circumstances, it was not accepted from him to cooperate with Income Tax department in the case of assessee. In the case of CIT v. U.M. Shah, Proprietor, Shrenik Trading Co. [1972 (6) TMI 16 - BOMBAY HIGH COURT] has held that, if the parties had received the summons but did not appear, the assessee could not be blamed. In view of the above facts and circumstances, cash deposit of appearing in the bank statement also stands fully explained and substantiated, therefore, we direct the A.O. to delete the addition made. - Decided in favour of assessee. Issues Involved:1. Addition of Rs. 30,50,000/- as undisclosed income under Section 68 of the Income Tax Act.2. Addition of Rs. 15,00,000/- as undisclosed income under Section 68 of the Income Tax Act.Detailed Analysis:1. Addition of Rs. 30,50,000/- as Undisclosed Income:The assessee challenged the addition of Rs. 30,50,000/- made under Section 68 of the Income Tax Act, arguing that the amount represented the sale consideration received for the sale of land. The assessee provided a sale deed dated 07.03.2011 and claimed that the entire consideration was received in cash, which was deposited in the bank account. The Assessing Officer (AO) issued summons to the purchaser, who submitted her bank statement directly to the AO but did not appear in person. The AO rejected the explanation because the bank statement did not show withdrawals of Rs. 30,50,000/- and made the addition as undisclosed income.The Tribunal noted that the assessee had offered the capital gain arising from the sale in his computation of income, which was accepted by the AO. The Tribunal observed that the sale deed clearly established the receipt of the sale consideration in cash and that the identity and genuineness of the transaction were proven. The Tribunal held that the AO's rejection of the explanation was not justified merely because the purchaser did not appear in person. The Tribunal emphasized that the assessee was never confronted with the bank statements of the purchaser, which were used against him, violating the principles of natural justice. The Tribunal directed the AO to delete the addition of Rs. 30,50,000/-.2. Addition of Rs. 15,00,000/- as Undisclosed Income:The assessee also challenged the addition of Rs. 15,00,000/-, explaining that the amount was received back from Shri Hanuman, to whom an advance was paid for the purchase of land in FY 2004-05. The assessee provided a notarized sale agreement and an affidavit from a witness confirming the transaction. The AO issued summons to Shri Hanuman, who did not attend the proceedings, and treated the amount as unexplained credit due to the lack of confirmation.The Tribunal noted that the identity of Shri Hanuman was undisputed as the summons were served. The genuineness of the transaction was proven by the appearance of the amount in the assessee’s balance sheet since FY 2004-05 and the sale agreement. The Tribunal held that the assessee had recovered his own money, and thus, the capacity of Shri Hanuman was not an issue. The Tribunal emphasized that the explanation offered by the assessee was supported by evidence and could not be rejected solely because Shri Hanuman did not appear in person. The Tribunal directed the AO to delete the addition of Rs. 15,00,000/-.Conclusion:The Tribunal allowed the appeal of the assessee, directing the AO to delete the additions of Rs. 30,50,000/- and Rs. 15,00,000/- made under Section 68 of the Income Tax Act. The Tribunal emphasized the importance of following principles of natural justice and considering the evidence provided by the assessee.