2023 (3) TMI 347 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on unexplained cash deposits, Department's appeal dismissed.

The Tribunal upheld the CIT(A)'s findings, dismissing the Department's appeal challenging the deletion of the addition on unexplained cash deposits. The ... Unexplained Cash deposited by the assessee jointly with his father - whether CIT(A) is correct in holding that the AO erred in observing that there was no reference of the cash deposits issue in the assessment order passed for A.Y. 2011-12, in the case of the Assessee's father? - HELD THAT:- CIT(A) has taken due cognizance of this Office Note while deleting the addition made by the Assessing Officer. CIT(A) has, observed that the principal deposit has already been examined (by the AO) in the case of Shri Gurdev Singh, father of the assessee, for A.Y. 2011-12; that the Office Note concerning that Assessment clearly refers to the same amount of Rs. 1.95 cores, which was the basis of reopening of the assessment; and that in those assessment proceedings, the proposed buyer of the land, the agreement relating to which land was cancelled (i.e., Shri Inderjit Singh) himself certified the source of the said cash. DR has not been able to successfully challenge the aforesaid well versed findings of the Ld. CIT(A). Accordingly, these findings are hereby confirmed. CIT(A) is also correct in observing that the other issues raised by the AO in the assessment order, i.e., the issue pertaining to the recipient having been alone at the time of the receipt of the amount, or the amount having been received on behalf of Shri Gurdev Singh, father of the assessee, and the issue of Circle rate of the property, are, at best, marginal issues, having no bearing on the decision of the issues at hand, i.e., the deposit of cash. Otherwise too, the response of the assessee with regard to these issues has not been at all rebutted before us, much less, successfully. The plausibility of the assessee's stand has been examined by us and it has been found to be in order, being self-evident there from. The assessee had explained the source of the cash deposited, to be refund of advance given for purchase of property in the earlier years. This source of cash could have been examined by the AO, in case of any doubt, by reopening the earlier year assessment. This was not done. Moreover, Sh. Inderjit Singh, the intending seller of the agricultural land, in his statement before the AO, confirmed the return of the advance amount. Shri Inderjit Singh had stated that when the payment was received by him, he received it alone and from his side, there was nobody present. The paper of the assessee would show his presence and the presence of his father and witnesses - The name of the purchaser of the stamp papers is immaterial in the case of Real Estate, such stamp papers being normally purchased in the name of the seller. So far as regards the AO's observation that NRIs cannot purchase agricultural land in India without RBI permission and as per FEMA, whereas no RBI permission was taken for purchase of land in the present case, it has been stated that since no land was purchased and only agreement to sell was entered into, which agreement was cancelled later on, no RBI or FEMA permission was applicable or required and, therefore, permission was not applied for. Concerning the AO's doubt that Shri Inderjit Singh stated that no Member of any Panchayat intervened in the cancellation agreement, once again, it has been stated that when the parties to the agreement to sell agree to the cancellation of the agreement, no intervention of Panchayat is required, there being no dispute between the parties. None of the above elaborate categoric point-wise rebuttals of the assessee, as made before and considered by the Ld. CIT(A), has, to reiterate, even been challenged before us, much less successfully, on behalf of the Department. It has not been established as to how the doubts raised by the AO (termed as evidence brought on record by the AO) go to prove that the explanation and evidence given by the Assessee was created evidence, produced as an afterthought, not representing reality. Further, the Department has also failed to show as to how the Ld. CIT(A) erred in relying on the Assessee's explanation, particularly when the contents of the documents were not proved to be in-genuine or false. - Decided in favour of assessee. Issues Involved:1. Delay in filing the appeal.2. Deletion of addition on account of unexplained cash deposits.3. Reliability of evidence and documents provided by the assessee.4. Examination of the same bank account in the case of the assessee's father.5. Applicability of FEMA regulations and RBI instructions.Detailed Analysis:1. Delay in Filing the Appeal:During the hearing, it was noticed that there was a delay of 128 days in filing the appeal. The Department submitted a detailed reasoning for the delay and requested for condonation. The Tribunal considered the facts and reasoning provided and condoned the delay.2. Deletion of Addition on Account of Unexplained Cash Deposits:The primary issue was whether the CIT(A) erred in deleting the addition of Rs. 1,96,32,000/- made by the AO on account of unexplained cash deposits. The AO had reopened the completed assessment based on information that the assessee, an NRI, had deposited Rs. 1.95 crores in cash in his NRO bank account held jointly with his father. The AO observed contradictions in the statements and documents provided by the assessee and concluded that the cash deposits were not explainable, adding the amount to the income of the assessee under section 68 of the Act.3. Reliability of Evidence and Documents Provided by the Assessee:The AO questioned the reliability of the documents provided by the assessee, noting several discrepancies such as the mismatch in figures and words in the agreements, the purchase of stamp papers, and the destruction of original documents. The AO also doubted the explanation provided by the assessee regarding the source of the cash deposits, which was stated to be a refund of advance given for the purchase of property.4. Examination of the Same Bank Account in the Case of the Assessee's Father:The CIT(A) observed that the same bank account had been examined in the case of the assessee's father, Shri Gurdev Singh, and no adverse view had been taken regarding the cash deposits. The CIT(A) noted that the AO had lost sight of an Office Note forming part of the assessment order dated 4.3.2016, which recorded the source of the cash deposits as the receipt back of money on account of the cancellation of an agreement. The CIT(A) found that the primary requirement of an explanation for the cash deposits had been brought on record and that the amount could not be treated as unexplained under section 68.5. Applicability of FEMA Regulations and RBI Instructions:The AO raised concerns regarding the legality of the agreement under FEMA regulations and RBI instructions, noting that NRIs cannot purchase agricultural land in India without permission. The CIT(A) observed that since no land was purchased and only an agreement to sell was entered into, which was later cancelled, no permission was applicable or required.Conclusion:The Tribunal upheld the findings of the CIT(A), noting that the Department had failed to successfully challenge the detailed and well-reasoned order. The Tribunal confirmed that the CIT(A) had taken due cognizance of all relevant facts and documents, and the explanations provided by the assessee were found to be plausible and in order. The appeal filed by the Department was dismissed as being without merit.Order Pronounced:The appeal was dismissed, and the order was pronounced on 07.02.2023.