2020 (2) TMI 1090 - AT - Income Tax

Unexplained cash payments - assessee could not prove the source of cash payments made to the various farmers - HELD THAT - Addition prima facie was unsustainable in the wake of various material placed on record before the Ld. CIT (A) and also before the AO that the amount of ₹ 90 lac was withdrawn from the bank account and thereafter, it was immediately paid to the seller and this was proved by way of sale deed, copy of bank statement, copy of cash book and ledger account. Even, the Ld. CIT (A) has finally not made any adverse inference, and in this manner such an addition stood deleted. Addition u/s 68 on account of share application money received from the Director of the assessee company - HELD THAT - All the amounts have come through clearance. Ld. CIT(A) did not even asked to prove the source of such credit amount in his bank account if the creditor/share applicant who has furnished his bank statement and if the creditor is not confronted about the source, then assessee cannot be expected to prove the source of the source or explain the credit entries of the creditor, because same can only be proved by the creditor himself which in this case both Assessing Officer and Ld. CIT(A) have failed to do so and has simply gone by the fact that the income returned is less. The other material fact of availability of fund has not been inquired into, when Director of the assessee company was duly responding and complying with the notices and therefore, merely on such presumption, the addition cannot be made, because in so far as assessee is concerned it has not only established the identity and genuineness of the transaction but also the creditworthiness by providing the entire bank statement and the source wherefrom the amount have been received. It is not a case of any information or material coming on record that the share application money has been received through any accommodation entry or by an entry provider or by any conduit manner. Therefore, such an addition of ₹ 1.50 crore cannot be sustained and same is directed to be deleted - Appeal of the assessee is allowed.

Issues Involved:

1. Addition of ?90,00,000 as income from other sources.
2. Enhancement of addition to ?1,50,00,000 under Section 68 of the Income Tax Act, 1961.
3. Validity of the enhancement made by the Commissioner of Income Tax (Appeals) [CIT(A)].

Detailed Analysis:

1. Addition of ?90,00,000 as Income from Other Sources:

The Assessing Officer (AO) added ?90,00,000 as income from other sources, suspecting that the source of cash payments for land purchase was unverified. The assessee argued that the cash was withdrawn from the bank and immediately paid to sellers, substantiated with documents like the cash book, bank book, and bank statements. The CIT(A) called for a remand report, which led to further examination of the transactions. The AO noted that ?1.65 crore was received in the bank account, out of which ?90,00,000 was withdrawn. The CIT(A) found that the amount was withdrawn from the bank and paid to sellers, thus deleting the addition of ?90,00,000.

2. Enhancement of Addition to ?1,50,00,000 under Section 68:

The CIT(A) enhanced the addition to ?1,50,00,000 under Section 68, treating it as unexplained cash credit. The enhancement was based on the finding that the source of ?1.50 crore received from Director Shri Arun Agarwal was unexplained. The assessee provided confirmations, bank statements, and other documents to establish the genuineness of the transaction. Despite this, the CIT(A) held that the creditworthiness of Shri Arun Agarwal was not proved, leading to the enhancement.

3. Validity of the Enhancement Made by the CIT(A):

The assessee contested the enhancement, arguing that the CIT(A) exceeded its jurisdiction by enhancing the addition under a different head of income. The assessee relied on various judgments to support the argument that the CIT(A) cannot introduce a new source of income. The Tribunal observed that the CIT(A) made the enhancement based on the same transaction examined by the AO and found no new source of income was introduced.

Tribunal's Findings:

The Tribunal found that the AO's addition of ?90,00,000 was unsustainable as the assessee provided sufficient evidence proving the source and immediate use of the cash withdrawn from the bank. Regarding the enhancement to ?1,50,00,000, the Tribunal noted that the assessee had provided all necessary documents to prove the identity, creditworthiness, and genuineness of the transaction with Shri Arun Agarwal. The Tribunal emphasized that the AO and CIT(A) failed to analyze the bank statements and other documents properly, which showed sufficient funds were available and no cash deposits were made before the issuance of cheques.

Conclusion:

The Tribunal deleted the addition of ?1,50,00,000 made under Section 68, as the assessee successfully proved the identity, creditworthiness, and genuineness of the transaction. Consequently, the legal issue regarding the validity of the enhancement became academic and was rendered infructuous. The appeal of the assessee was allowed.

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