2018 (7) TMI 2207 - AT - Income Tax

Unexplained cash credits u/s 68 - as assessee failed to offer the nature and source of credits, the AO made the addition - HELD THAT - Assessee has withdrawn the amounts and made the payments to land lords during the financial year 2009-10 from January to March on three occasions. Similarly, the assessee has made cash deposits of ₹ 805,00,00 from April 2010 to September 2010 and the time gap for withdrawal and deposit was very short. The revenue has not disputed the fact that the assessee had withdrawn the sums from his bank accounts and there were no other investments made by the assessee as per the information available on record, to disbelieve the submission of the assessee. If the AO disbelieves the land advances, conclusion would be the availability of cash with the assessee unless it is established that the funds were used for some other purpose. Since the assessee had sufficient cash balance available from the withdrawals made from the Bank, there is no reason to suspect the source of deposits made in the bank account In case, the department is of the view that advances given was false the same sum of ₹ 95.00 lacs would be available as cash balance and the assessee required to be assessed for wealth tax, but there is no case for disbelieving the source. The fact remains that the assessee has withdrawn the sum of ₹ 95,00,000/- and the said amount would be available to the assessee either in cash or advances unless it is proved otherwise. Since the assessee had sufficient withdrawals from the bank account in the immediately preceding assessment year, we do not see any reason to disbelieve the source of credits made in the bank account. - Decided in favour of assessee.

Summary

Issues Involved:
1. Appeal against order of Commissioner of Income Tax (Appeals) regarding assessment year 2011-12.
2. Addition of ?85,00,000 under unexplained cash credits u/s 68 of Income Tax Act.
3. Dismissal of Ground No.4 related to interest levy.
4. Dispute over source of cash deposits made by the assessee.
5. Appeal before the Tribunal challenging CIT(A)'s decision.

Analysis:

1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. Grounds No.1 and 5 were deemed general and did not require adjudication. Ground No.4, related to the levy of interest u/s 234A, 234B, and 234D, was dismissed as not pressed due to the lack of arguments by the Ld.AR.

2. The main issue revolved around the addition of ?85,00,000 under unexplained cash credits u/s 68 of the Income Tax Act. The Assessing Officer (AO) found that the assessee had made cash deposits in the bank without explaining the source. The CIT(A) disbelieved the explanation provided by the assessee, leading to the confirmation of the addition.

3. During the Tribunal hearing, the assessee argued that the cash withdrawals were used as advances for land purchase, which were later returned and redeposited in the bank account. The Tribunal noted that the assessee had provided details of withdrawals and advances made, establishing a clear link between the cash withdrawals and deposits.

4. The Tribunal scrutinized the details provided by the assessee, showing withdrawals for land advances and subsequent deposits in the bank account. It was observed that the time gap between withdrawals and deposits was minimal, indicating a genuine transaction. The Tribunal held that the assessee had sufficient cash balance from the withdrawals to support the deposits, dismissing the doubts raised by the revenue.

5. Ultimately, the Tribunal set aside the CIT(A)'s order and deleted the addition made by the AO, thereby allowing the appeal of the assessee. The decision was based on the established link between the withdrawals and deposits, affirming the genuineness of the transactions.

In conclusion, the Tribunal's decision favored the assessee by accepting the explanation provided regarding the source of cash deposits, leading to the deletion of the addition under unexplained cash credits.