2021 (3) TMI 918 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - DR before us has not brought any iota of evidence suggesting that money received by the assessee does not represent the money which was advanced by it on the earlier occasion. Thus it can be safely inferred that the amount received by the assessee represents its own money which was advanced in the earlier year and this fact was also accepted by the Revenue. Accordingly, we are of the view that there cannot be any question for attracting the provisions of section 68 of the Act in the hands of the assessee for receiving its own money as discussed above. Assessee has discharged its onus as provided under section 68 of the Act namely the identity, genuineness and creditworthiness of the parties. For the identity, the assessee has furnished the PAN/address/bank details/confirmation of Shri Kanjibhai Desai. Admittedly, the entire transaction for receiving the money from the impugned party was carried out through the banking channel and therefore there cannot be any doubt on the genuineness of the transactions. The copy of the bank statement is also placed. Creditworthiness of Shri Kanjibhai Desai is also not in doubt as the amount received by the assessee represents its own money which was advanced in the earlier year as elaborated somewhere in the preceding paragraph. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition made by the AO for ?3.59 crores on account of unexplained cash credit under section 68 of the Income Tax Act.
2. Validity of proceedings initiated under section 147 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Deletion of Addition of ?3.59 Crores as Unexplained Cash Credit:

The Revenue challenged the deletion of an addition made by the Assessing Officer (AO) for ?3.59 crores, which was treated as unexplained cash credit under section 68 of the Income Tax Act. The assessee, a limited company engaged in real estate development, argued that the amount received from the land aggregator, Shri Kanjibhai Desai, represented its own money advanced in an earlier year. The assessee contended that the money was returned through banking channels when land deals did not materialize.

The AO observed that the group company of the assessee, M/s Radhe Consultancy, had given cash to the land aggregator, which was then deposited back into the assessee's account. The AO found this suspicious, arguing that the cash should have been returned to the group company instead of the assessee and that the transactions were conducted in a manner suggesting the cash represented unaccounted money of the assessee.

Upon appeal, the CIT (A) deleted the addition, noting that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the transactions. The CIT (A) highlighted that the transactions were conducted through account payee cheques, and the reassessment of Shri Kanjibhai Desai had accepted the cash deposits without any addition, thereby validating the sources of cash deposits.

The ITAT upheld the CIT (A)'s decision, agreeing that the assessee had demonstrated compliance with section 68 of the Act by providing necessary documentation, including PAN, address, bank details, and confirmations. The ITAT also noted that the transactions were conducted through banking channels, confirming their genuineness. Furthermore, the ITAT observed that the reassessment of Shri Kanjibhai Desai had accepted the cash deposits, thereby supporting the assessee's claim that the amount received was a repayment of advances given in an earlier year.

2. Validity of Proceedings Initiated Under Section 147:

The assessee raised a cross-objection challenging the validity of the proceedings initiated under section 147 of the Income Tax Act. The assessee argued that the reassessment proceedings were invalid. However, since the ITAT decided the main issue on merit in favor of the assessee, the technical issue regarding the validity of the reassessment proceedings became infructuous.

The ITAT noted that the assessee's representative had instructed not to press the issue if the assessee succeeded on the merits. Consequently, the ITAT dismissed the cross-objection as infructuous.

Conclusion:

The ITAT dismissed the appeal filed by the Revenue, upholding the CIT (A)'s decision to delete the addition of ?3.59 crores as unexplained cash credit. The ITAT also dismissed the cross-objection filed by the assessee challenging the validity of the reassessment proceedings under section 147 as infructuous. The order was pronounced in the court on 22/02/2021 at Ahmedabad.