2018 (1) TMI 1074 - AT - Income Tax

Addition on account of the opening cash in hand - Held that - It is a fact that a statement was filed before the AO which contained certain mistakes. The AO has not commented on this fact in his remand report dated 03.12.2012. All the evidences in the paper book submitted by the assessee alongwith application for additional evidence were not considered by him. However, the correct statement of cash reveals that at no point of time did the assessee have cash in hand which was less than ₹ 8,19,700/-. However, there was an amount of ₹ 8,19,700/- at its maximum, therefore, Ld. CIT(A) has rightly allowed the credit upto that amount only and sustained the amount of ₹ 4,09,000/- (Rs. 12,28,700 less ₹ 81,19,700) only, which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Addition on account of Earned Money received in respect of sale of agriculture land - Held that - when the existence of the parties concerned is not in doubt and the majority of the earnest money was received by cheque details were made available to the AO, and the AO has not proved nor challenged their capacity to give such an earnest money, assessee was not called upon to produce those parties or to file confirmation letters, it was illegal on his part to tax the amount under section 68 of the Act. Non refund of the amount (though it was actually refunded as is shown in the statement of cash which was prepared at his instructions), it is immaterial in law for taxing the amount as it was received under agreement to sell the agricultural land. In view of the Ld. CIT(A) has rightly deleted the entire addition - Decided against revenue Addition on Earned Money received in respect of sale of flat - Held that - This is not borne out by facts, as the payments which were to be made to the assessee by the buyers in terms of a clause in the agreement, did happen. We note that one of the buyers, Sh. Vikram Singh, appeared before the AO and said that he received a monthly rental income of ₹ 25,000/- to ₹ 30,000/- per month, as also owing 10 acres of agricultural land. He also stated that he had given the advances to the assessee from time to time and also confirmed that the amount was returned with a penal amount of ₹ 1 lakh on cancellation of agreement. In our opinion, the said purchaser has proved his identity, genuineness and capacity to make the impugned payments. No where the AO been able to prove that this was the assessee s own money channelized through a third party, therefore, Ld. CIT(A) has rightly deleted the entire addition

Summary

Issues involved:
- Restriction of addition on account of opening cash in hand
- Deletion of addition on account of earned money from sale of agricultural land
- Deletion of addition on account of earned money from sale of flat
- Cross Objection by the Assessee

Analysis:

Restriction of addition on account of opening cash in hand:
The Revenue's appeal challenged the restriction of the addition on account of opening cash in hand. The AO had made an addition of ?12,28,700, but the CIT(A) restricted it to ?8,19,700. The ITAT noted that the correct cash statement showed that the assessee never had less than ?8,19,700 in hand. Therefore, the CIT(A)'s decision was upheld, and the appeal by the Revenue was rejected.

Deletion of addition on account of earned money from sale of agricultural land:
The AO had made an addition of ?55,21,687 on account of earned money from the sale of agricultural land. However, the ITAT found that since the earnest money was received for agricultural land situated beyond 8 KMS of any municipality, it did not qualify as a capital asset under the Act. The CIT(A) rightly deleted the entire addition, as the AO did not challenge the capacity of the parties involved in giving the earnest money. Thus, the appeal by the Revenue on this issue was rejected.

Deletion of addition on account of earned money from sale of flat:
Regarding the addition of ?29,55,000 on account of earned money from the sale of a flat, the ITAT found that the buyers had indeed made payments to the assessee as per the agreement. One of the buyers confirmed the payments and also stated that the amount was returned upon cancellation of the agreement. The AO failed to prove that the money was channeled through a third party. Therefore, the CIT(A)'s decision to delete the addition was upheld, and the Revenue's appeal on this issue was rejected.

Assessee's Cross Objection:
The Assessee's Cross Objection was withdrawn during the hearing, and it was noted to be time-barred. The ITAT dismissed the Cross Objection as not sustainable in the eyes of the law.

In conclusion, both the appeal filed by the Revenue and the Cross Objection filed by the Assessee were dismissed by the ITAT in this judgment delivered on 22/01/2018.