2023 (9) TMI 1603 - AT - Income Tax

Unexplained cash credit addition of Rs. 25 lakhs upheld under Section 68 based on handwritten Ikrarnama receipt entries

Late sh Shrinath Versus ITO, Ward-2 (5), Jabalpur

ITAT Jabalpur upheld addition of Rs. 25 lakhs as unexplained cash credit under Section 68 based on handwritten receipt entries in Ikrarnama signed by ... Addition being difference amount of agreement and sale deed - receipt recorded in ‘Ikrarnama’ for transfer of share of property of the assessee, which has been treated by the Assessing Officer as unexplained cash credit u/s 68 - HELD THAT:- Firstly, that no such cash payment was received by the assessee and the AO has made addition on presumption only. In the instant case, handwritten record of receipt of the cash of Rs. 20 lakhs in assessment year 2011-12 and Rs. 5 lakhs in assessment year 2012-13, is clear evidence of receipt of the cash by the assessee. Below the receipt of amount in cash, the assessee has put his signature also. In such circumstances, the contention of the assessee that addition has been made on presumption basis by the Assessing Officer is rejected. Assessee submitted that said ‘Ikrarnama’ was cancelled and it cannot be made the basis of the addition - We find that no cancellation agreement has been filed before the lower authorities in support of the contention, and therefore, contention of the assessee cannot be accepted without any supporting documentary evidence. Further, the Assessing Officer has made addition on the basis of the cash received in the handwritten jotting duly signed as appearing in the ‘Ikrarnama’. Separate addition amount to double addition in the hands of the assessee as Assessing Officer had already made addition for the difference in the amount recorded in ‘Ikrarnama’ and Sale Deed - We find that in assessment year 2012-13, Assessing Officer made addition of Rs. 30 lakhs as difference amount of Rs. 90 lakh recorded in the ‘Ikrarnama’ and Sale Deed amount of Rs. 60 lakhs as income from other sources, however, the Ld. CIT(A) has deleted the said addition. We find that Assessing Officer has made addition for amount of Rs. 25 lakhs on the basis of the handwritten entries signed by the assessee in the ‘Ikrarnama’, which is beyond the amount of Rs. 90 lakh. We find that the addition of Rs. 30 lakhs has already been deleted by the Ld. CIT(A) and therefore, this amount of Rs. 25 lakh cannot be set off against the said addition of Rs. 30 lakhs which was made by the Assessing Officer, but now deleted by the Ld. CIT(A). Computation of the long-term capital gain - It is important that for the assessee to demonstrate that said amount of Rs. 30 lakhs was returned back to Shri Ashok Rohani. Though the assessee claimed to have paid interest to Shri Ashok Rohani, but paying interest itself can’t prove that said amount was returned. If the said amount is refunded or returned to Shri Ashok Rohani then cash amount received by the assessee would be within the limits of Rs. 90 lakhs as sale consideration for share of the assessee as per the ‘Ikrarnama’ and in that case, it can’t be treated as unexplained cash credit and it shall be treated as part of sale consideration of the property. But if the assessee fails in demonstrating the evidences as we have stated in above paragraphs, the addition shall be sustained. Though, the case is very old and the assessee is no more and represented by legal heir, in the facts and circumstances of the case, we feel it appropriate to restore the matter to the file of the Assessing Officer for limited verification as stated above and decide the issue accordingly. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. We may like to observe that in the ‘Ikrarnama’ under reference, members of ‘Tandon’ family other than assessee, have received cash amounts against sale of their share of property. We attempted to ascertain fate of their cases which could guide us as precedent in the matter, but no information was provided to us by either party. We have also noted that in body of order, the AO mentioned for rejection of deduction u/s 54 of the Act, however, ultimately in the computation, no addition has been made for resultant long-term capital gain. Issues Involved:1. Justification of additions made based on presumption and surmises.2. Alleged double addition of Rs. 30,00,000.3. Validity of additions based on a canceled agreement.4. Additions under Section 68 for unexplained cash credits.5. Consideration of returned advance in assessing income.Issue-wise Detailed Analysis:1. Justification of Additions Made Based on Presumption and Surmises:The assessee contested the addition of Rs. 20,00,000 for AY 2011-12 and Rs. 5,00,000 for AY 2012-13, arguing that these were based solely on presumption. The Assessing Officer (AO) relied on an 'Ikrarnama' (sale agreement) found during a search which contained handwritten notes indicating cash receipts. The Tribunal found that the handwritten notes, signed by the assessee, constituted clear evidence of cash receipt, thus rejecting the argument that the additions were based on mere presumption.2. Alleged Double Addition of Rs. 30,00,000:The assessee argued that the addition of Rs. 30,00,000 for the difference between the 'Ikrarnama' and the sale deed was a double addition. The AO had initially made this addition as income from other sources, but the CIT(A) deleted it, directing that the entire amount of Rs. 90,00,000 should be considered for computing long-term capital gains. The Tribunal noted that since the CIT(A) deleted the Rs. 30,00,000 addition, the Rs. 25,00,000 cash receipt could not be offset against it.3. Validity of Additions Based on a Canceled Agreement:The assessee claimed that the 'Ikrarnama' was canceled and should not be the basis for additions. However, no evidence of cancellation was provided, and the Tribunal upheld the AO's reliance on the document, as the handwritten notes indicating cash receipts were signed by the assessee.4. Additions Under Section 68 for Unexplained Cash Credits:The AO treated the cash amounts as unexplained cash credits under Section 68, arguing that the amounts exceeded the Rs. 90,00,000 recorded in the 'Ikrarnama'. The Tribunal noted that the assessee failed to demonstrate that the Rs. 30,00,000 advance from Shri Ashok Rohani was returned. Without evidence of repayment, the cash receipts exceeded the agreed sale consideration, justifying the AO's treatment as unexplained cash credits.5. Consideration of Returned Advance in Assessing Income:The assessee claimed that advances from Shri Ashok Rohani were returned with interest, thus should not be considered income. The Tribunal found no evidence supporting the return of the advance, such as bank statements or confirmations from Shri Ashok Rohani. Therefore, the Tribunal remanded the matter to the AO for verification of the alleged repayment, indicating that if the advance was indeed returned, the cash receipts should be considered part of the sale consideration rather than unexplained credits.Conclusion:The Tribunal allowed the appeals for statistical purposes, remanding the issue of whether the Rs. 30,00,000 advance was returned to the AO for verification. The Tribunal emphasized the need for the assessee to substantiate the return of the advance to determine the nature of the cash receipts correctly.