2021 (4) TMI 489 - AT - Income Tax

Undisclosed deposits in bank account - addition made by the Assessing Officer treating the cash deposit to assessee's own income earned from undisclosed sources - Cancellation of agreement/deal to buy house on which advance payment made due to no clear title of seller - seller agreed compromise and to pay the money in bank account in six equal instalments - HELD THAT - We notice that during the course of assessment proceedings AO examined Mr. Ravi Gulati and recorded his statement. Mr. Gulati in his statement has categorically stated that he had paid ₹ 15,00,000/- to the assessee in instalments. He has further stated that he had taken the said amount from his employer Sh. Rahul Mehra. Sh. Ravi Gulati one of the accused in the F.I.R.registered with P.S. Manimajara, which prima facie shows his involvement in the said fraudulent deal. Hence, the documents on record corroborate the contention of the assessee. The AO has not examined the in-charge of the concerned police station to verify the version of the assessee. Similarly, the AO has not examined Sh. Rahul Mehra to ascertain as to whether he had paid money to Sh. Ravi Gulati. As per the settled law AO cannot make addition on the basis of surmises and conjunctures. The AO could have placed on record some important facts by examining the concerned persons to falsify the contention of the assessee. Under these circumstances, we have no reason to disbelieve the contention of the assessee and to reject the documentary evidence on record - Decided in favour of assessee.

Summary

Issues:
- Addition of ?15,00,000 as income earned from undisclosed sources
- Rejection of documentary evidence by the CIT(A)
- Failure to verify the source of payment by the AO
- Compliance with legal principles and evidence evaluation

Analysis:
1. The appeal was against the CIT(A)'s decision upholding the addition of ?15,00,000 to the assessee's income as earned from undisclosed sources. The assessee contended that the cash deposit was from Sh. Ravi Gulati, supported by documentary evidence. The CIT(A) dismissed the appeal without considering the submissions and evidence provided by the assessee during the assessment proceedings.

2. The assessee argued that the CIT(A) erred in confirming the addition without due consideration of the explanations and evidence presented. The counsel highlighted the written submissions and documents furnished, indicating the source of the deposit. On the contrary, the Departmental Representative supported the CIT(A)'s decision, stating the failure of the assessee to substantiate their claims during the assessment and appellate proceedings.

3. The Tribunal examined the case details where the cash deposit was related to a property deal dispute settled through a compromise. The assessee deposited the amount received from Sh. Ravi Gulati in his bank account following the compromise. The AO's failure to verify crucial aspects, such as the source of payment and statements from relevant individuals, was noted. The Tribunal emphasized that additions cannot be made on conjectures, requiring concrete evidence and verification.

4. It was observed that Sh. Ravi Gulati's statement, supported by documents and the involvement of the police, aligned with the assessee's contentions. The AO's lack of investigation into key aspects, like verifying the source of payment and examining other relevant individuals, was deemed insufficient. The Tribunal concluded that the CIT(A)'s decision was contrary to the evidence on record and legal principles, directing the AO to delete the addition. The appeal was allowed in favor of the assessee.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision based on legal principles and evidence evaluation.