2015 (10) TMI 1606 - AT - Income Tax

Addition of unexplained cash credits - Held that - We observe that once the land record proves this creditor s land to be fertile, presumption rather goes in favour of the creditor that he is sowing crops and deriving agricultural income. The land record rather specifies the nature of the crop grown as well. Merely because he is a farmer not having enough documentary evidence of having sold the produce is no ground to dispute the aforesaid land revenue document. The other presumptions of collateral security is also a technical reason. The Assessing Officer appears to have applied business law principles in agricultural farming intricacies. We deem it appropriate to observe that merely because a farmer has pledged his land as a collateral security for obtaining same bank loan scheme does not necessarily mean that he is not having sufficient agricultural income. The third objection of large family being maintained on the same agricultural income is also without any basis. The authorities below have not done any homework or to inquire about sources of income in case of other family member; if any. Therefore, we hold that the impugned presumptions drawn in the course of assessment and affirmed in the lower appellate proceedings are without any supportive material. We accordingly hold that the assessee s maternal uncle a farmer had sufficient means to advancing cash loan of ₹ 2 lacs in cash since not having a bank account. There is no material on record apart from these presumptions so as to doubt source/genuineness/creditworthiness of the assessee s claim. Therefore, this 2 lac amount is held to be explained. For the balance sum of ₹ 8.5 lacs in case of other four creditors AO himself holds them to be assessee s relatives. Therefore, identity of the creditors is not an issue here. They have also filed confirmations along with all revenue documents. The only difference that they have not appeared in person before the Assessing Officer. As already indicated the assessing authority proceeded mere assumptions and presumptions. It also raises similar reasons against these four creditors as well. In these circumstances, we observe that AO s reasons in all four cases are identical to those raised in case of Shri Govindbhai decided hereinabove. We draw support therefrom. And accept assessee s arguments herein as well and ignore technical reason of personal nonappearance of these four creditors. The assessee s explanation regarding balance cash credit of ₹ 8.5 lacs is accepted. He gets relief in this appeal to the tune of ₹ 10.5 lacs. The balance addition of unexplained cash credit amounting to ₹ 14,135/- is confirmed. - Decided partly in favor of assessee.

Summary

Issues:
1. Addition of unexplained cash credits amounting to Rs. 10,14,135 in the assessment under section 143(3) of the Income Tax Act for A.Y. 2002-03.
2. Delay in filing the appeal by the assessee.
3. Assessment of additional capital introduced by the assessee.
4. Doubts raised by the Assessing Officer regarding the genuineness/creditworthiness of the creditors.
5. Confirmation of the Assessing Officer's action by the CIT(A).
6. Appeal against the impugned addition of cash credits.

Issue 1: The judgment pertains to the addition of unexplained cash credits amounting to Rs. 10,14,135 in the assessment under section 143(3) of the Income Tax Act for A.Y. 2002-03. The Assessing Officer invoked section 68 due to doubts on the genuineness/creditworthiness of the assessee's claim. The assessee introduced additional capital, and the creditors were his relatives. The Assessing Officer raised concerns about the source of funds deposited in cash by the creditors, lack of interest received, and the creditors' capacity to lend the money.

Issue 2: The assessee filed the appeal after a delay of four days, for which a condonation petition was submitted. The Revenue did not dispute the content of the petition, and the delay was condoned, allowing the case to proceed for decision on merits.

Issue 3: The assessment revealed that the assessee had introduced additional capital worth Rs. 10,64,135, with details provided by the assessee regarding the creditors, who were claimed to be relatives. The Assessing Officer scrutinized the details, including land records, and raised doubts about the genuineness and creditworthiness of the creditors, resulting in the addition of Rs. 10,64,135 to the assessee's income.

Issue 4: The judgment addressed the doubts raised by the Assessing Officer regarding the genuineness and creditworthiness of the creditors. The Assessing Officer's assumptions about the creditors' capacity to lend money, lack of bills for the sale of agricultural produce, and collateral security were challenged. The Tribunal observed that the Assessing Officer's presumptions lacked supportive material, especially in the case of the assessee's maternal uncle, who was a farmer with agricultural income.

Issue 5: The CIT(A) confirmed the Assessing Officer's action, leaving the assessee aggrieved and leading to the appeal. The Tribunal reviewed the case file, considering the explanations provided by the assessee and the supporting documents. The Tribunal disagreed with the Assessing Officer's presumptions and technical reasons, ultimately allowing the appeal in part and providing relief to the assessee.

In conclusion, the judgment addressed various issues related to the addition of unexplained cash credits, delay in filing the appeal, assessment of additional capital, doubts on the genuineness of creditors, confirmation of the Assessing Officer's action by the CIT(A), and the final decision on the appeal by the Tribunal, providing relief to the assessee in part.