2017 (4) TMI 1100 - AT - Income Tax

Unexplained deposits in bank account - sale proceeds of the agricultural land sold by assessee s brother-in-law - Held that - As from the bank account and the document placed on record from which a cash flow statement is prepared and available at page 19 of the assessee s paper book in which it is mentioned that the amount the of ₹ 25 lacs has been withdrawn by the assessee from his bank account out of which ₹ 19,42,880/- is utilized for purchase of land in the name of Smt. Rajnesh Devi and on expenses of registry. Further an amount of ₹ 5 lakh is advanced to Smt. Bharti Devi and Satish Devi for purchase of land. Thus, an amount of ₹ 24,42,800/- has been utilized. There is no material to hold that any part of the withdrawn amount of ₹ 25 lacs has been retained by the assessee as his commission for facilitating the purchase of land/ use of his bank account. Therefore, on such hypothetical assumption, the addition cannot be sustained and thus the same is directed to be deleted. Hence, the solitary ground of the assessee is allowed.

Issues Involved:

1. Confirming the addition of ?5,76,200/- under the Income Tax Act.
2. Source and utilization of ?25,00,000/- deposited in the assessee's bank account.
3. Assessing the genuineness and creditworthiness of the transaction.
4. Determining the nature of the retained amount as commission/benefit income.

Issue-wise Detailed Analysis:

1. Confirming the Addition of ?5,76,200/-:
The primary issue is whether the addition of ?5,76,200/- to the assessee's income was justified. The CIT(A) confirmed the addition, considering it as commission/benefit income retained by the assessee. However, the Tribunal found this view neither factually correct nor legally tenable, directing the deletion of the addition.

2. Source and Utilization of ?25,00,000/-:
The assessee, a farmer, received ?25,00,000/- in his bank account from his brother-in-law, who sold agricultural plots. The CIT(A) accepted the source of the deposit as genuine, supported by affidavits and statements. The amount was withdrawn for purchasing land in the name of the brother-in-law's wife, with ?19,23,800/- utilized for this purpose. The Tribunal noted that the total withdrawal was ?24,42,800/-, including ?5,00,000/- advanced for another land purchase.

3. Assessing the Genuineness and Creditworthiness of the Transaction:
The CIT(A) and the Tribunal both evaluated the genuineness and creditworthiness of the transaction. The CIT(A) considered judicial precedents and concluded that the source of the cash deposits was explained. The Tribunal reiterated that the identity, genuineness, and creditworthiness were established, as the brother-in-law admitted to providing the funds, which were proceeds from land sales.

4. Determining the Nature of the Retained Amount as Commission/Benefit Income:
The CIT(A) inferred that ?5,76,200/- retained by the assessee was commission/benefit income for facilitating the land purchase and using his bank account. However, the Tribunal found no material evidence to support this inference. The Tribunal emphasized that hypothetical assumptions cannot be the basis for taxation, and the entire amount was utilized for the intended purpose, thus directing the deletion of the addition.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the ?5,76,200/- addition, concluding that the source and utilization of the funds were satisfactorily explained, and no part of the amount was retained as commission/benefit income. The judgment emphasized the importance of concrete evidence over hypothetical assumptions in tax assessments.

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