Assessee wins appeal against Section 69 addition for agricultural land investment despite delayed cheque clearance

ITAT Indore allowed the assessee's appeal against addition under Section 69 for unexplained investment in agricultural land. The Revenue made the addition based on presumption that cash transactions occurred despite payment through post-dated cheques cleared after two years. The Tribunal held that registered sale deed and bank statements constituted documentary evidence proving payment through cheques only. The delayed clearance was explained by mutual understanding between parties from the same community where interest is not charged per customary practice. The Tribunal emphasized that presumption cannot override documentary evidence and authorities lacked proof of cash payments.

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Issues Involved:
1. Addition of Rs. 37,75,000/- as unexplained investment.
2. Treatment of Rs. 37,75,000/- as unexplained cash in hand.
3. Legality of reopening the assessment under Section 147.
4. Reopening assessment without prior approval under Section 151.

Detailed Analysis:

1. Addition of Rs. 37,75,000/- as Unexplained Investment:
The assessee challenged the addition of Rs. 37,75,000/- made by the Assessing Officer (AO) under Section 69 of the Income-tax Act, 1961, on the grounds that the addition was based on surmises and conjectures. The assessee argued that the investment in agricultural land at Ratlam was made through six post-dated cheques, which were cleared from the assessee's bank account on various dates in 2013. The documentary evidence, including the registered sale-deed and bank statements, corroborated this claim. The Tribunal found that the AO and CIT(A) had made the addition based on mere presumption without any concrete evidence of cash transactions. Consequently, the Tribunal deleted the addition of Rs. 37,75,000/-.

2. Treatment of Rs. 37,75,000/- as Unexplained Cash in Hand:
The CIT(A) upheld the AO's addition by treating the amount as unexplained cash in hand under Sections 69A/69B of the Act. The CIT(A) presumed that the assessee must have paid the consideration in cash and subsequently received the cash back when the post-dated cheques were cleared. The Tribunal rejected this presumption, stating that the authorities had no evidence to support such a conclusion. The Tribunal emphasized that no addition can be made on mere suspicion or presumption, citing judicial precedents. The Tribunal found that the documentary evidence clearly showed that the consideration was paid through cheques, and there was no passing of cash between the parties. Therefore, the Tribunal deleted the addition made by the authorities.

3. Legality of Reopening the Assessment under Section 147:
The assessee initially challenged the reopening of the assessment under Section 147 of the Act. However, during the hearing, the assessee did not press this ground. Consequently, the Tribunal dismissed this ground as non-pressed.

4. Reopening Assessment without Prior Approval under Section 151:
Similarly, the assessee challenged the reopening of the assessment without obtaining prior approval of the Principal Commissioner of Income Tax (Pr. CIT) as required under Section 151 of the Act. This ground was also not pressed by the assessee during the hearing and was dismissed by the Tribunal as non-pressed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 37,75,000/- made by the AO under Section 69 of the Income-tax Act, 1961. The Tribunal found that the addition was based on mere presumption without any supporting evidence, and the documentary evidence clearly showed that the consideration for the land was paid through cheques. The grounds challenging the legality of the reopening of the assessment were dismissed as non-pressed. The order was pronounced in the open court on 05.02.2024.

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