Assessee proves buyer identity and creditworthiness through bank statements, unexplained credits addition deleted by tribunal

The ITAT Amritsar allowed the assessee's appeal regarding unexplained credits in books of account. The AO and CIT(A) had alleged that amounts received by the assessee were not genuine sale consideration. The ITAT held that the assessee adequately proved the buyer's identity, creditworthiness, and transaction genuineness through bank statements showing regular crore deposits. The tribunal ruled that proving the source of cash credit's source was not legally required. The department could investigate the buyer separately if concerned. The addition was deleted and the appeal was allowed.

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Issues Involved:

1. Addition of Rs. 1,58,00,000/- as unexplained credits in the books of account.
2. Genuineness of the sale transaction of agricultural land.
3. Creditworthiness of the buyer, Shri Kesar Singh.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 1,58,00,000/- as Unexplained Credits:

The assessee filed a return declaring an income of Rs. 38,53,250/-. During the assessment proceedings, the AO computed the income at Rs. 1,96,53,250/- by adding Rs. 1,58,00,000/- as unexplained credits. The AO was not satisfied with the explanation and material provided by the assessee regarding the sale of agricultural land. The CIT(A) confirmed this addition, stating that the appellant failed to substantiate the claim of exempt agricultural income and prove the creditworthiness of the buyer, Shri Kesar Singh.

2. Genuineness of the Sale Transaction of Agricultural Land:

The assessee argued that the amount of Rs. 1,58,00,000/- was received from the sale of agricultural land to Shri Kesar Singh. The sale deed was registered, and the cheques initially given by the buyer bounced due to insufficient funds. After prolonged negotiations, fresh cheques were received and encashed in the relevant assessment year. The assessee emphasized that the sale deed was genuine and executed in front of the appropriate authority, with photographs of both the buyer and seller. The department, however, alleged that the amount received was an afterthought and represented the assessee's own money introduced in the guise of sale consideration.

3. Creditworthiness of the Buyer, Shri Kesar Singh:

The AO and CIT(A) questioned the creditworthiness of Shri Kesar Singh, noting inconsistencies in the bank account and the sudden cash deposits followed by immediate transfers to the assessee's account. The assessee provided the buyer's bank statements, showing regular deposits in crores, to prove that the buyer was a man of means. The assessee argued that it was not their responsibility to prove the source of the buyer's funds, as the transaction was a sale of land, not a loan or deposit.

Judgment:

The tribunal found that the sale deed was genuine and supported by the registered document. The department failed to prove any other consideration received by the assessee apart from the sale consideration. The tribunal held that the amount received by the assessee was not unexplained credits but the sale consideration for the land. The assessee was not required to prove the source of the buyer's funds. The tribunal concluded that the addition of Rs. 1,58,00,000/- as unexplained credits was unwarranted and deleted the addition. The appeal filed by the assessee was allowed.

Order:

The appeal filed by the assessee is allowed, and the addition of Rs. 1,58,00,000/- is deleted. The order was pronounced in the open court on 26.07.2024.

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