2019 (2) TMI 39 - AT - Income Tax

Addition u/s 69A - sale of residential property - receipt in cash against sale of property and refund by way of cheque when transaction failed - Held that - There is a sale deed duly registered which states clearly that the sale consideration has been received by the assessee on or before the date of execution of the sale deed i.e, 8.7.2010, there is deposit of cash in bank account of the assessee on 8.7.2010, and there is also evidence of issuance of cheque dated 10.8.2010 by the buyer of the property in favour of the assessee and which has been credited in the assessee s bank account on 13.8.2010. In such a scenario, only probable scenario which exists is that the assessee has initially received cash of ₹ 20 lacs from the buyer of the property which was deposited in the assessee s bank account on 8.7.2010 which has resulted in closure of the sale transaction as evidenced by the sale deed executed on 8.7.2010. Subsequently, for reasons best known to the two parties, the buyer of the property issued a cheque of equivalent amount on 10.8.2010 which was deposited in assessee s bank account on 13.8.2010 and simultaneously, cash of equivalent amount was withdrawn by the assessee and returned to the buyer of the property. In light of peculiar facts and circumstances of the case, we agree with the assessee s explanation that the source of cash deposit of ₹ 20.5 lacs on 8.7.2010 is the balance sale consideration received from the buyer of the property and which has been duly offered to tax by the assessee in his return of income. In the result, ground of appeal is allowed.

Summary

Issues:
- Addition of ?20,50,000 made by AO under section 69A of the Act for A.Y. 2011-12.

Analysis:
1. Facts of the Case:
- The assessee sold a residential property and deposited the sale proceeds in the bank account.
- The AO observed cash deposits in the bank account totaling ?30,60,000.
- Discrepancy arose regarding the source of ?20,50,000 deposited in cash on 08.07.2010.

2. Assessee's Explanation:
- Assessee claimed ?9,50,000 was received in advance and the balance was deposited on 08.07.2010.
- Assessee stated that a cheque of ?20,00,000 was received from the buyer and returned on the same day.

3. AO's Findings:
- AO found the explanation unsatisfactory and issued a show-cause notice.
- Purchaser confirmed cash and cheque payments, leading to discrepancies in explanations.

4. CIT(A) Decision:
- CIT(A) confirmed the addition of ?20,50,000 as unexplained cash deposit.
- The purchaser denied making the cash deposit, supporting the AO's conclusion.

5. ITAT Decision:
- ITAT considered the sale deed, bank transactions, and buyer's cheque issuance.
- Found it improbable that the sale consideration was fully received before the registry.
- Accepted that cash deposit was part of the sale consideration, supported by evidence.

6. Conclusion:
- ITAT allowed the appeal, considering the sale deed, cash deposit, and cheque issuance.
- Accepted the assessee's explanation that the cash deposit was part of the sale consideration.
- Decided in favor of the assessee, overturning the CIT(A)'s decision.

7. Final Verdict:
- ITAT ruled in favor of the assessee, allowing the appeal against the addition of ?20,50,000.
- The judgment highlighted the importance of documentary evidence and the sequence of transactions in determining the source of funds.