2018 (3) TMI 896 - AT - Income Tax

Unexplained cash deposits - additions u/s 68 - creditor did not respond to the notice - nature of the transaction / identity of the creditors, genuineness and creditworthiness of the transaction - Held that - In the instant case, the Pattadar Pass Book, name and address of the creditors, agreement of sale and cancellation agreement and also the account copies were placed before the A.O. as well as the Ld. CIT(A). This fact is not controverted by the Learned Departmental Representative. Assessing Officer has issued summons to the creditor but when the creditor has not responded, the A.O. neither called upon assessee to produce the creditor nor gave further opportunity to the creditor to appear in person and assessment was made in a hurry on 28.03.2013. The fact remains that assessee represented before A.O. on 19.03.2013 whereas the assessee called Sri K. Chandra Sekhar Rao on 25.03.2013 and completed the assessment on 28.03.2013. This shows that the Assessing Officer has taken an adverse opinion without giving a proper opportunity to the assessee. Merely because the creditor did not respond to the notice, no adverse inference can be taken with regard to the creditworthiness of the creditor. The complete particulars and the source of income earned by the creditor were available on record and if there is any doubt with regard to the source, the assessee could have been given further opportunity. - Decided in favour of assessee

Summary

Issues:
Whether the addition of ?20 lakhs made by the Assessing Officer and confirmed by the Ld. CIT(A) towards 'unexplained cash deposits' is in accordance with law.

Detailed Analysis:
The case involved the assessment year 2010-2011 and centered around the question of the genuineness of cash deposits amounting to ?1,10,82,600 in the assessee's bank account. The Assessing Officer (A.O.) added ?20 lakhs under 'income from other sources' as unexplained cash deposits. The assessee claimed that the amount was received from a property sale agreement with Sri K. Chandra Sekhar Rao, but failed to produce him for verification, leading to doubts about the transaction's authenticity.

The A.O. and Ld. CIT(A) questioned the genuineness of the transaction due to insufficient evidence, including unregistered sale agreements and lack of proof of receipt and repayment of the cash. The Ld. CIT(A) highlighted the contravention of section 269SS of the Income Tax Act regarding cash transactions and lack of bank account details to confirm the money flow, upholding the addition.

The assessee argued before the Tribunal that the transaction was genuine, providing details of the property sale agreement, cancellation, and repayment of the amount. The assessee contended that the identity and creditworthiness of the creditor were established, citing the Hon'ble Supreme Court's requirement to issue summons and pursue further details from creditors.

The Tribunal considered the submissions and case laws cited by both parties. It noted that relevant documents, including the creditor's details, were presented to the A.O. and Ld. CIT(A), and the A.O.'s rushed assessment without giving proper opportunity to the assessee or the creditor was unfair. Following the principles laid down by the Hon'ble Supreme Court in a similar case, the Tribunal set aside the addition of ?20 lakhs, directing the A.O. to delete it.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the importance of providing proper opportunities for verification and adhering to legal procedures in assessing unexplained income.