2020 (1) TMI 1082 - AT - Income Tax

Addition u/s 68 - source of cash found deposited in the bank account of the - unexplained cash credit - Genuineness of retention of money /cash after sale of agricultural land for 8 months in the hands of father - HELD THAT - There is nothing extraordinarily unusual or abnormal in the fact of retaining money for sometime before gifting it even if to the son, since there are various considerations which are involved in making a gift and it is up to the donor to decide when and to whom to make the gift. In the present case the period of retention of the amount for eight months, we find, is not unusually large so as to doubt the genuineness of the same - Considering the fact that the source of the amount with the donor has not been doubted, nor has the Revenue pointed out or brought on record any fact showing the usage of the said amount by the donor prior to gifting, we do not see any reason to hold the said explanation improbable and we find the same acceptable. As far the savings made from agricultural income, the ld. CIT(A) we find had rejected the explanation stating that no cash flow statement was filed by the assessee. We do not find any merit in the same also. It is a fact on record that the father of the assessee was an agriculturists who had sold the agricultural land measuring 47 kanal 10 marla during the impugned year and 32 kanal in the preceding year, which is evidenced by the copy of sale deed filed. Therefore, the father of the assessee, till the preceding year was in possession of at least approximately 82 kanal of land. The amount of ₹ 4,65,000/- representing savings from his agricultural income from the said lands does not appear to be abnormally large amount. The insistence of the CIT(A) on the cash flow statement we find is unwarranted and may not be feasible also considering that the father of the assessee was illiterate agriculturist and the CIT(A) could very well have verified the correctness of the statement on the basis of the quantum of land in the possession of the father and the average agricultural produce therefrom. We, therefore, find that the basis given by the CIT(A) for rejecting the explanation of the assessee vis-a-vis the source of cash deposited to the extent of ₹ 19,17,000/- does not stand the test of reasoning and the same is, therefore, rejected. - Decided in favour of assessee. 10. We, therefore, hold that the source of cash deposited to the extent of ₹ 19,17,000/- stands explained. The order of the ld. CIT(A) is, therefore, set aside and the addition of ₹ 19,17,000/- is directed to be deleted.

Summary

Issues Involved:

1. Addition made under Section 68 of the Income-tax Act, 1961, on account of unexplained cash deposits in the assessee's bank account.

Issue-Wise Detailed Analysis:

1. Addition under Section 68 of the Income-tax Act, 1961:

The primary issue in this appeal concerns the addition of ?19,17,000/- under Section 68 of the Income-tax Act, 1961, due to unexplained cash deposits in the assessee’s bank account. The Assessing Officer (AO) initially made an addition of ?60,40,780/-, but the Commissioner of Income Tax (Appeals) [CIT(A)] reduced it to ?19,17,000/- after considering the assessee's submissions and additional evidence.

Assessee's Explanation:

The assessee explained that the cash deposits originated from money received from his father and his own savings of ?34,000/-. The father’s funds were claimed to be sourced from the sale of agricultural land, past savings, and a loan. The assessee provided detailed documentation, including sale deeds and a pronote, to substantiate the sources of the funds. The AO, in his remand report, accepted the assessee's explanation and found the sources of cash deposits to be true and correct.

CIT(A)’s Findings:

The CIT(A) accepted the explanation for ?31,47,000/- from the sale of agricultural land during the year and ?9,70,000/- from a loan but rejected the explanation for the remaining ?19,17,000/-. The CIT(A) found it improbable that the father would retain the sale proceeds for more than eight months before gifting them to his son. Additionally, the CIT(A) did not accept the explanation regarding the ?4,65,000/- from the father’s savings and the ?34,000/- from the assessee’s own savings, citing a lack of detailed evidence.

Tribunal’s Analysis:

The Tribunal disagreed with the CIT(A)’s reasoning. It found no merit in the argument that retaining money for eight months before gifting it was improbable, noting that the timing of a gift is at the donor’s discretion. The Tribunal emphasized that the source of the funds with the father was not doubted, and no evidence was presented to show that the funds were used elsewhere before being gifted.

Regarding the ?4,65,000/- claimed as savings from agricultural income, the Tribunal found the CIT(A)’s insistence on a cash flow statement unwarranted, especially considering the father’s status as an illiterate agriculturist. The Tribunal noted that the father’s possession of substantial agricultural land supported the plausibility of the claimed savings.

Conclusion:

The Tribunal concluded that the source of the ?19,17,000/- cash deposits was satisfactorily explained. It set aside the CIT(A)’s order and directed the deletion of the ?19,17,000/- addition. Consequently, the appeal of the assessee was allowed.