2016 (7) TMI 1315 - AT - Income Tax

Addition made on account of cash deposits in bank - whether the assessee who had entered into an agreement to sell the property has received the amount in cash from known sources? - Held that - The assessee has furnished on record the complete information in respect of source of availability of cash in the hands of lenders i.e. Mr. Vinod Joshi and Mr. Sanjay Loharkar. Once the sources are known to the assessee and the same have been explained by way of filing confirmations and the relevant documents and also the persons who have given the amount have accepted to have given, there is no merit in making any addition in the hands of assessee. The said advances have been made to two co-owners of the property i.e. the assessee in the present case and Shri Sanjeev Gajanan Rasane. The assessee points out that the total consideration fixed was ₹ 90 lakhs and ₹ 45 lakhs was received by both the co-owners i.e. including the assessee. The assessment in the case of Shri Sanjeev Gajanan Rasane has been completed under section 143(3) vide order dated 07.03.2013 and no addition in this regard has been made in the hands of co-owner. In the totality of the above said facts and circumstances of the case, there is no merit in any addition in the hands of assessee and the same is deleted. Accordingly, an addition of ₹ 44,69,950/- made in the hands of assessee is deleted. This ground of appeal raised by the assessee is thus, allowed. - Decided partly in favour of assessee.

Summary

Issues:
1. Enhancement of appellant's income without notice and opportunity of hearing.
2. Addition of cash deposit in bank account and subsequent enhancement of the same.

Analysis:
Issue 1: The appellant challenged the CIT(A)'s order for enhancing the income without providing notice and opportunity of hearing. The appellant contended that this irregularity required the order to be quashed. However, this ground was dismissed as not pressed.

Issue 2: The main issue revolved around the addition of cash deposits in the appellant's bank account and its subsequent enhancement. The appellant declared total income, including agricultural income, and claimed cash deposits were advances from two farmers for land purchase. The Assessing Officer disallowed a portion of the cash received, citing lack of proof for the source, genuineness, and creditworthiness of the farmers. The CIT(A) upheld this disallowance, labeling the transaction as fabricated. The appellant argued that the cash was received against sale agreements with the farmers, emphasizing the co-ownership of the land and sufficient family landholdings. The Tribunal noted that the Assessing Officer had accepted 50% of the cash receipts but the CIT(A) added the entire amount as income. After reviewing the evidence, the Tribunal found merit in the appellant's case, concluding that the cash was received from known sources and deleted the addition. The Tribunal also highlighted that the co-owner's assessment did not include any such addition, further supporting the appellant's position. As a result, the addition of cash deposits was deleted, and the appeal was partly allowed.

In conclusion, the Tribunal ruled in favor of the appellant, deleting the addition of cash deposits and partially allowing the appeal. The judgment emphasized the importance of establishing known sources of income and providing sufficient evidence to support transactions in income tax assessments.