2012 (10) TMI 747 - AT - Income Tax

Unexplained income of the assessee - Addition u/s 68 - no other source of income except agricultural income - Held that - As decided in Commissioner of Income-Tax Versus Smt. P. K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT the sources of investments (i.e. that the same were financed from out of the savings from the income of the properties which were left by her mother s first husband) could not be treated as income of the assessee. As in the present case the assessee deposited the amount of Rs. 26,30,000/- received through cheque by the father of the assessee who expired and the source as explained by the legal heir that the amount was received by his father on account of sale of agricultural land, thus considering the social status and living standard and other attendant circumstances, the only inference that should have been drawn by the A.O. must have been in favour of the credibility of the explanation rather than the materiality of evidence - in favour of assessee.

Issues:
1. Addition of Rs. 30 lacs under section 68 of the Act.
2. Source of deposited amount claimed to be from sale proceeds of agricultural land.
3. Deletion of addition by Commissioner of Income Tax (Appeals).
4. Challenge before the Tribunal regarding the deletion of addition.

Issue 1: Addition of Rs. 30 lacs under section 68 of the Act
The Revenue challenged the deletion of the addition of Rs. 30 lacs made under section 68 of the Act by the first appellate authority. The Assessing Officer added the cash deposit as unexplained cash credit/income of the assessee. The appellant contended that the first appellate authority erred in considering whether the assessee had other sources of income or not, especially when the broker denied the transaction. However, the counsel for the assessee strongly defended the impugned order by emphasizing that there was no other source of income for the assessee except agricultural income.

Issue 2: Source of deposited amount claimed to be from sale proceeds of agricultural land
The assessee deposited Rs. 56,30,000/- in his bank account, claiming it to be from the sale proceeds of agricultural land. The Assessing Officer asked for the source of the deposited amount, which the assessee stated was received through a cheque by the father, who had passed away. The legal heir also claimed that the amount was from the sale of agricultural land. The Commissioner of Income Tax (Appeals) deleted the addition, stating that the assessee had no other source of income besides agricultural income. The AR referred to a decision of the Hon'ble Supreme Court and argued that the legal heirs were unable to explain the bank deposits made by the deceased, emphasizing the credibility of the explanation over the materiality of evidence.

Issue 3: Deletion of addition by Commissioner of Income Tax (Appeals)
The Commissioner of Income Tax (Appeals) deleted the addition after considering the facts and circumstances of the case. The appellant contended that the deposits in the bank account were made by the deceased father, who was engaged in agricultural operations, and the legal heirs stated that there was no other source of income for the family. The affidavit submitted by the legal heirs supported the claim that the deposited amount was from the sale proceeds of agricultural land. The Commissioner found the explanation satisfactory based on the Apex Court's decision and the ITAT's decision, concluding that there was no other source of income for the appellant except agricultural income.

Issue 4: Challenge before the Tribunal regarding the deletion of addition
Upon analyzing the observations in the assessment order, the conclusion in the impugned order, and the arguments of the counsels, the Tribunal found a categorical finding that there was no other source of income for the assessee except agricultural income. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the legal precedents cited, including the decision in the case of P.K. Noorjahan and Mrs. Malini Ramnath Rele vs. ITO. Consequently, the Tribunal dismissed the appeal of the Revenue, emphasizing that since the assessee had no other sources of income except agricultural income, there was no merit in challenging the deletion of the addition.

In conclusion, the Tribunal upheld the deletion of the addition of Rs. 30 lacs, emphasizing the absence of any other source of income for the assessee apart from agricultural income, as supported by legal precedents and the explanation provided by the legal heirs.

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