2019 (1) TMI 89 - AT - Income Tax

Addition u/s 69A - biana (advance) against sale of his residential house - Held that - If the cash was maintained as he might, on a failure of the transaction, be required to repay the intending buyer, the same was not done. And neither could the assessee make use of the cash so generated, stated to be for his urgent needs, serving thus no purpose The agreement stipulating the forfeiture of the advance in case of a default by the buyer, there was no imminent risk of repayment (of advance), which could in any case be repaid out of the sale proceeds of the sale of house. Why, again, the transaction failing, was the house not sold, i.e., to another, despite requiring, as stated, funds for meeting the financial crisis of his business and discharge the debts of his, since deceased, father. There is, thus, considered whichever way, nothing to justify the assessee s explanation of the cash with him as on account of an advance against sale of his residential house. Even as no such offer was made, it makes one wonder as to why one, in the process of shifting abroad, as inferable from his having gone abroad before 10.04.2008, would consider investing in India and, further, in a residential house, even as his residential needs are being ostensibly met and, in any case, would abate on his proceeding abroad. Even if one would were to take into account a change of events, i.e., after 03.10.2007, the date of the last installment (of ₹ 2.50 lacs), he would rather complete the transaction and sell the house to another to avoid the loss, if not actually gain in-as-much as real estate generally tends to appreciate. That is, rather than incur a substantial loss (of ₹ 6.50 lacs), which makes the assessee s case all the more improbable and make-believe. It may though be clarified that the assessee s case fails not on that account, or for that reason, alone, but primarily in view of there being nothing on record to show of the intending buyer as having paid advance and, thus, suffered the said loss. In fact, the agreement being not registered, the validity of the said agreement, in view of Registration and Other Related Laws (Amendment) Act, 2001, is in serious doubt I have little hesitation in confirming the impugned assessment and, accordingly, decline interference. The assessee s reliance on the decision in P.K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT is also misplaced. In the present case, the assessee is admittedly a businessman, whose business though may be experiencing a downturn, even as there is nothing on record to exhibit the same. He has, further, deposited ₹ 12.90 lacs in cash in his savings bank account, maintaining an average cash balance of ₹ 4 lacs during the year. - The assessee s appeal is dismissed

Summary

Issues:
1. Dismissal of assessee's appeal contesting assessment under section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2008-09 based on cash deposits in bank account.
2. Validity of explanation provided by assessee regarding cash deposits as an advance against sale of residential house.
3. Failure to produce necessary evidence and witnesses, including the buyer, during assessment proceedings.
4. Rejection of assessee's plea for remitting the matter back to the Assessing Officer for further consideration.

Detailed Analysis:
1. The judgment pertains to an appeal by the assessee against the Commissioner of Income Tax (Appeals) order dismissing the appeal contesting the assessment under section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2008-09. The assessee had deposited cash in his bank account, and the onus was on him to explain the nature and source of the funds to avoid it being deemed as his income for the relevant year.

2. The assessee claimed that the cash deposits were an advance received against the sale of his residential house and produced a sale agreement dated 10.04.2007 as evidence. However, the agreement was not registered, and the buyer was not produced during the assessment proceedings. The tribunal found the explanation unsatisfactory, especially considering the lack of urgency in selling the house despite the alleged financial crisis faced by the assessee.

3. The failure to produce necessary evidence and witnesses, including the buyer, Sh. Kuldeep Singh, raised doubts about the authenticity of the transaction. The tribunal noted that the sale agreement was self-serving and lacked credibility, as highlighted in previous court decisions. The absence of proper opportunity to present crucial evidence was a significant factor in the dismissal of the assessee's appeal.

4. The assessee's plea for remitting the matter back to the Assessing Officer for further consideration was rejected due to the lack of substantial evidence supporting the claim of an advance against the sale of the residential house. The tribunal emphasized the importance of substantiating claims with concrete evidence and following due process during assessment proceedings to ensure fairness and accuracy in tax assessments.