2024 (6) TMI 730 - AT - Income Tax

Property purchase valid despite uncleared post-dated cheques when consideration agreed and paid through litigation-affected cheques

Jyoti Goyal Versus DCIT, 1 (1), Bhopal

ITAT Indore held that property purchase was not without consideration despite non-clearing of post-dated cheques, as consideration was agreed and paid ... Addition u/s 56(2)(vii) or 28(iv) - Non-clearing of post-dated cheques - case of purchase without consideration - HELD THAT:- From these facts and documents, firstly it is clear that the assessee has not only agreed consideration with the sellers but also paid the same through cheques and secondly there is a merit in assessee’s submission that part of the cheques given to the sellers have not been cleared for payment because of the litigation or uncertainty attached with the property. Hence, the assessee is very much correct in claiming that it cannot be said to be a case of purchase ‘without consideration’. The assessee’s claim gets further strength from the assertion by Ld. AR that in the event the decision of High Court or BDA does not materialize in favour of assessee, there would be cancellation of deal only and still if the assessee keeps the deal, the assessee would necessarily release the amounts of postdated cheques to the sellers. Therefore, in the situation, the purchase is made for consideration and the unpaid amount is only a ‘liability’ of assessee. Hence, without any lengthy deliberation, it can be easily concluded that the purchase done by assessee cannot be said to be ‘without consideration’. Accordingly, it is neither a case of section 56(2)(vii)(b) nor of section 28(iv) as perceived by the lower-authorities. Hence, the addition made by AO and confirmed by CIT(A) is not justified. We, therefore, delete the addition made by AO. Addition u/s 69 on account of unexplained deposits in bank a/c. - HELD THAT:- As in the situation, when the assessee has undisputed cash-withdrawals from one bank, there is a source available for making deposits in another bank. AO has, however, rejected assessee’s submission on certain reasons which are not substantial and more in the nature of conjecture or surmise. For instance, the AO has stated that the cash-book is not a sufficient evidence to explain that the source of deposits was the withdrawals. This itself is a vague point taken into account by AO. Then, the AO says that there is a time-gap between withdrawals and deposits or the amounts of withdrawals and deposits are not same but by raising this point, one cannot say that the money withdrawn by assessee was not available for re-deposit unless the AO could point out any other utilization of money. It is nowhere a case of AO that the assessee has utilized money for any other purpose. Even the time-gap in withdrawals and re-deposits is a few days only. Then, the AO has made comparison of turnover/profit of assessee with the quantum of withdrawals/deposits but that comparison is also wrong when the assessee claims that the moneys withdrawn were re-deposited. It is nobody’s case that the business turnover was deposited. We also agree with Ld. AR that there are numerous decisions wherein the cash-withdrawals from bank have been accepted as source for re-deposit in bank and additions have been deleted. Taking into account all these aspects, we are of the considered view that the addition made by AO and upheld by CIT(A) is not correct. Consequently, we delete the same. This ground is also allowed. Addition towards cash-receipts as unexplained - HELD THAT:- We find that the assessee has shown taxable receipts and not claimed deduction of any expenditure on the basis of those agreements. Undisputably, those receipts are part of sale-proceeds of the lands and the profit resulting therefrom has been offered in assessee’s return as ‘business income’ and duly assessed by AO. AO has not doubted the cost, sale-proceeds and profits from those lands. An additional fact in case of land at Pura Chindwara is such that the major portion of sale-proceed has been received through cheques and only a small portion of Rs. 4,00,000/- is received in cash. As further noteworthy that the AO has not made any effort from purchasers so as to dislodge the impugned receipts declared by assessee. Therefore, in such a case, even if the sale-agreements were on plain paper and not registered but when the substantial profit arising therefrom is assessed by AO without any questioning, the impugned cash-receipts forming part of sale-proceeds giving rise to the very same profit cannot be treated as ingenuine. In any case, when the impugned receipts are part of the sale-proceeds, it amounts to double taxation of the transactions when the AO has assessed profits arising therefrom and at the same time added cash-receipts separately. This, in our considered view, is not justified. Being so, we delete the additions of Rs. 9,00,000 + 4,00,000 made by AO. Receipt on account of agreement for Godamaru - AO has, however, made addition on account of cash-receipt alone without giving any finding in assessment-order on other side of refund. We find that the addition made by AO is not in order when the assessee has refunded money back to the giver immediately within a period of four days due to cancellation of deal. Consequently, we delete the addition. Receipt on account of advance for Badwai - Relying upon this letter of assessee to AO, Ld. AR requested that no addition was warranted in present AY 2012-13 when the same has already been taxed in AY 2015-16. Since the point raised by assessee is a matter of record, we remit this issue back to the file of AO for verification of record of AY 2015-16 qua the claim of assessee and therefore make adjudication afresh. We direct the assessee to provide necessary assistance when called upon by AO. This issue is thus allowed for statistical purpose. Issues Involved:1. Legality of initiation of proceedings u/s 148 and subsequent assessment order.2. Justification of addition of Rs. 90,75,000/- u/s 56(2)(vii) or 28(iv).3. Justification of addition of Rs. 50,25,000/- u/s 69 for unexplained cash deposits.4. Justification of addition of Rs. 15,50,000/- for unexplained cash receipts.Summary:Issue 1: Legality of initiation of proceedings u/s 148 and subsequent assessment orderThe assessee challenged the initiation of proceedings u/s 148 and the assessment order passed by the AO, claiming them to be illegal and invalid. However, no submissions were made by the representatives during the hearing. Therefore, this ground was treated as non-pleaded/non-pressed and dismissed.Issue 2: Justification of addition of Rs. 90,75,000/- u/s 56(2)(vii) or 28(iv)The AO observed that the assessee received an immovable property amounting to Rs. 90,75,000/- without consideration and made an addition u/s 56(2)(vii)(b) or 28(iv). The CIT(A) upheld the AO's action. The assessee contended that the property was purchased for consideration and was part of stock-in-trade, thus not attracting the provisions of section 56(2)(vii)(b) or 28(iv). The Tribunal found that the purchase was made for consideration and the unpaid amount was a liability, thus deleting the addition made by the AO.Issue 3: Justification of addition of Rs. 50,25,000/- u/s 69 for unexplained cash depositsThe AO made an addition of Rs. 50,25,000/- for unexplained cash deposits, rejecting the assessee's explanation that the deposits were made from cash withdrawals from another bank. The CIT(A) upheld this addition. The Tribunal found that the cash withdrawals exceeded the deposits, and the cash book provided by the assessee was not rejected by the AO. Therefore, the addition was not justified, and the Tribunal deleted the same.Issue 4: Justification of addition of Rs. 15,50,000/- for unexplained cash receiptsThe AO made an addition of Rs. 15,50,000/- for unexplained cash receipts. The CIT(A) upheld this addition. The Tribunal analyzed the receipts and found that the cash receipts were part of the sale proceeds of lands, and the profit from these sales was already assessed by the AO. Therefore, the addition of Rs. 9,00,000/- and Rs. 4,00,000/- was deleted. For the receipt of Rs. 70,000/-, the Tribunal found that it was refunded due to the cancellation of the deal, thus deleting the addition. For the receipt of Rs. 4,80,000/-, the Tribunal remitted the issue back to the AO for verification, as it was claimed to be taxed in AY 2015-16.Conclusion:The appeal was partly allowed, with the Tribunal deleting the additions made by the AO for issues 2, 3, and part of issue 4, while remitting the remaining part of issue 4 for verification.