2019 (1) TMI 218 - AT - Income Tax

Addition of cash credits - Held that - Explanation of the assessee was not found satisfactory on the basis that before advancing money to the assessee there were cash deposits in the account of the creditors. CIT(A) has admitted the factum of earning of agricultural income. Therefore inference that the entire amount was not belonging to the creditors would be fallacious. We therefore looking into the facts and material available on records hereby delete 50% of the addition of 17, 51, 000/-. The ground of the assessee s appeal is partly allowed.

Summary

Issues Involved:
1. Addition of transfer expenses of ?2,00,000/- on sale of agricultural land.
2. Addition of cash credits amounting to ?17,51,000/-.

Issue-wise Detailed Analysis:

1. Addition of Transfer Expenses of ?2,00,000/- on Sale of Agricultural Land:
The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed this ground as not pressed.

2. Addition of Cash Credits Amounting to ?17,51,000/-:
The assessee challenged the addition of ?17,51,000/- as unexplained cash credits in the bank account. The detailed analysis of this issue is as follows:

Assessee's Submissions:
- The assessee provided a detailed explanation for each loan received, including the identity of the creditors, their income sources (primarily agricultural), and the repayment details.
- The creditors were:
1. Shri Jagdish Patidar: ?3,50,000/-
2. Smt. Lalita Patidar: ?3,51,000/-
3. Shri Vishwas Patidar: ?3,00,000/-
4. Shri Radheshyam Patidar: ?3,00,000/-
5. Shri Prahlad Patidar: ?4,50,000/-

Revenue's Argument:
- The Departmental Representative opposed the submissions and supported the orders of the lower authorities.

Tribunal's Findings:
- The Tribunal examined the materials and submissions on record and noted that the CIT(A) had confirmed the addition by observing that the cash deposits in the creditors' accounts were just below ?50,000/-, suggesting an attempt to avoid scrutiny.
- The CIT(A) found that the land holdings and agricultural income of the creditors were not sufficient to justify the cash deposits made before advancing loans to the assessee.
- The CIT(A) also noted that the assessee had filed balance sheets, trial balances, ledger accounts, cash books, and bank statements, reflecting the receipt of money as loans.
- The Tribunal referred to the jurisdictional High Court's observations in the case of VISP (P) Ltd. vs. Commissioner of Income Tax, which supported the addition under Section 68 of the Income Tax Act if the liability shown was found to be bogus.

Tribunal's Decision:
- The Tribunal acknowledged that the CIT(A) admitted the fact of earning agricultural income by the creditors.
- It concluded that inferring the entire amount did not belong to the creditors would be incorrect.
- Consequently, the Tribunal decided to delete 50% of the addition of ?17,51,000/-, partly allowing the assessee's appeal.

Conclusion:
The appeal was partly allowed, with the Tribunal deleting 50% of the addition of ?17,51,000/- and dismissing the ground related to the transfer expenses as not pressed. The order was pronounced in the open court on 03.01.2019.