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

ITAT Jabalpur upheld addition of Rs. 25 lakhs as unexplained cash credit under Section 68 based on handwritten receipt entries in Ikrarnama signed by assessee. Court rejected assessee's contention that addition was made on presumption, noting clear evidence of cash receipt. Assessee's claim of cancelled Ikrarnama rejected due to lack of supporting documents. However, matter restored to AO for limited verification to determine if Rs. 30 lakhs was returned to the payer, which would affect treatment as unexplained credit versus sale consideration.

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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.

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