2017 (8) TMI 1505 - AT - Income Tax

Unexplained cash credit u/s 68 - cash received as advance for sale of ancestral property - Unproved creditworthiness of the creditor - Held that - Creditor has, not filed any return of income, did not have PAN, did not remember details of his bank account, did not remember date of transaction of property. The creditors also did not produce copy of agreement, sale purchase deed of the property or any other relevant documents relating to property in question. Even the sale consideration of JCB Machine was made in cash. Even the said property was not reflected in the books of the assessee. The said entry of ₹ 10,70,000/- was found credited in the books of M/s Surya Roshni Limited Bahadurgarh. Thus it was found that the entry of cash credit found in the books of the assessee, the identity was of a different person and not M/s Surya Roshni, the creditworthiness of the creditor could not be proved in as much as no evidence was brought on record and the genuineness of the transaction also could not be established by any documentary evidence. The action of the AO in treating the said credit of ₹ 10,70,000/- as income from undisclosed sources u/s. 68 was rightly confirmed by the Ld. CIT(A). With regard to addition of ₹ 4,00,000/- is concerned, find that fact remains that cash was deposited on the same date on which cheque was issued to the assessee on 9.12.2012. In such circumstances, the onus is on the assessee to prove the genuineness of the transaction and the creditworthiness of the creditor. AO has recorded that opportunity to prove the creditworthiness of the creditor was granted to the assessee. However, the assessee failed to avail of such opportunity. The assessee has not produced any additional evidence to prove the genuineness or creditworthiness of the creditor during appeal proceedings as well. Cash was deposited in the account of the creditor on the same date on which cheque was issued and also the fact that income declared by the creditor is only ₹ 64,007/-, it was held that the creditworthiness of the creditor is not established. The action of the AO in adding ₹ 4,00,000/- received from Smt. Urmila Devi as unexplained cash credit u/s. 68 was rightly confirmed by the CIT(A) - Decided against assessee.

Summary

Issues Involved:

1. Addition of ?10,70,000/- as unexplained cash credit under Section 68 of the Income Tax Act.
2. Addition of ?4,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of ?10,70,000/- as Unexplained Cash Credit:

The assessee contested the addition of ?10,70,000/- which was claimed to be an advance received from Shri Ishwar Singh for the sale of ancestral property. The assessee argued that the Commissioner of Income Tax (Appeals) [CIT(A)] failed to appreciate that the deposits in the bank account against the sale of ancestral property could not be taxed as income. The assessee also contended that the inability to explain the source of the source should not confirm the addition under Section 68 of the Act, and that complete evidence was provided to demonstrate the legitimacy of the advance received.

The Assessing Officer (AO) had observed discrepancies, including the lack of documentary evidence for the transaction, the absence of disclosure of the ancestral property in the assessee's records, and the non-existence of a written agreement. The AO concluded that the story of the sale was fabricated and added ?10,70,000/- as income from undisclosed sources under Section 68.

The CIT(A) upheld the AO's findings, noting that the creditor did not file any return of income, lacked a PAN, and failed to provide details of the bank account or transaction dates. The creditor also did not produce any sale agreement or relevant documents. The entry of ?10,70,000/- was found credited in the books of M/s Surya Roshni Limited, not in the assessee's books. The CIT(A) confirmed the addition, stating that the identity, creditworthiness, and genuineness of the transaction were not established.

The Tribunal, after reviewing the records and arguments, agreed with the CIT(A) and AO. It noted that the assessee failed to provide sufficient evidence to prove the legitimacy of the advance and upheld the addition of ?10,70,000/- as income from undisclosed sources.

2. Addition of ?4,00,000/- as Unexplained Cash Credit:

The assessee also contested the addition of ?4,00,000/- received as an unsecured loan from his wife, Smt. Urmila Devi. The assessee argued that the CIT(A) failed to appreciate that the deposit in the wife's account before remittance to the assessee should not be taxed as income. The loan was received via account payee cheques, and the wife had confirmed the loan.

The AO observed that ?4,00,000/- was deposited in cash in the wife's account on the same date the cheque was issued to the assessee. The assessee did not produce the creditor to prove creditworthiness, and the AO concluded that the transaction was not genuine, adding the amount as income from undisclosed sources under Section 68.

The CIT(A) upheld the AO's findings, noting that the cash deposit and cheque issuance on the same date raised doubts about the genuineness of the transaction. The income declared by the creditor was only ?64,007/-, which did not support the creditworthiness. The CIT(A) confirmed the addition of ?4,00,000/- as unexplained cash credit.

The Tribunal agreed with the CIT(A) and AO, noting that the assessee failed to prove the genuineness and creditworthiness of the transaction. The addition of ?4,00,000/- as income from undisclosed sources was upheld.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, upholding the additions of ?10,70,000/- and ?4,00,000/- as unexplained cash credits under Section 68 of the Income Tax Act. The Tribunal found that the assessee failed to provide sufficient evidence to prove the legitimacy and creditworthiness of the transactions in question.