2021 (10) TMI 906 - AT - Income Tax

Addition u/s 68 - Assessee failure to discharge the onus of proving the Cash Credit in the Bank Account - HELD THAT - We have carefully gone through this entry in the bank statement on this date, which shows the withdrawal of ₹ 1 crore vide Cheque No.3564 on 13.7.2012. However, the AO has mistaken it as a deposit of ₹ 1 crore. Section 68 cannot be applied for withdrawal made from the bank account. It is not a case of unexplained deposit so as to sustain the addition u/s. 68 of the Act. Accordingly, the addition of ₹ 1 crore is deleted. Unexplained cash deposits - AO cannot by merely rejecting a reasonably good explanation by converting it as no proof. In our opinion, the explanation offered by the assessee was reasonable and genuine explanation cannot be rejected by the AO without any cogent material. In the present case, the AO wants the assessee to prove the source of source of credits which is not required u/s. 68 in the case of these kind of credits. Primarily the assessee has established the source of credit that she has received it from her husband and also brought on record that assessee s husband is having vast agricultural lands. The owning of agricultural lands by assessee s spouse is not at all doubted by the AO. It is also brought on record by the assessee that she is also owning agricultural land and entered into sale deed in favour of M/s. Dreamz Infra India Pvt. Ltd. on 05.9.2012 in respect of converted property bearing Survey No.121/3 (Old No.121/1) measuring 1 acre 10 guntas at Boganahali Village, Varthur Hobli, Bangalore East Taluk for a consideration of ₹ 3,20,00,000. The genuineness of assessee s spouse entered into sale agreements with various parties cannot be doubted without any material in hand. Provision to section 68 inserted w.e.f. 1.4.2013 requires the assessee to prove the source of source. This proviso shall apply to funds collected by a closely held company from resident shareholders. Hence the same will not be applicable to the assessee as she is an individual.In our opinion, the assessee discharged the burden cast upon her to explain the identity of parties, capacity and genuineness of the transaction. Accordingly, this addition is deleted. Cash deposits remained unexplained and un-reconciled - As the assessee has explained that ₹ 28 lakhs has been deposited into the bank account out of the advance of ₹ 50 lakhs received from N. Gopalaiah. The AO accepted the advance of ₹ 50 lakhs received from N. Gopalaiah, but he has doubted the deposit of ₹ 28 lakhs out of advance of ₹ 50 lakhs into the assessee s bank account. We find that ₹ 50 lakhs received from N. Gopalaiah as advance by assessee s husband is available to the assessee to deposit ₹ 28 lakhs in the bank account. The AO has not doubted the receipt of ₹ 50 lakhs by the assessee s spouse from N. Gopalaiah. The source is explained. Hence, we delete this addition. Appeal of assessee allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition of ?1,00,00,000 as unexplained cash deposit.
3. Addition of ?1,25,00,000 as advance received from Shri Venkatesh Gowda and Shri Rajanna.
4. Addition of ?28,00,000 as unexplained cash deposit.

Condonation of Delay:
The assessee filed the appeal with a delay of 88 days, attributing the delay to the time taken for the disposal of an application under section 154 by the CIT(Appeals). The Tribunal condoned the delay, considering it was due to bona fide reasons, referencing the Supreme Court judgment in Collector of Land Acquisition v. Mst. Katiji, which emphasizes a pragmatic approach to condonation of delay to ensure substantial justice.

Addition of ?1,00,00,000 as Unexplained Cash Deposit:
The AO added ?1,00,00,000, alleging it was an unexplained cash deposit. However, the assessee clarified that the amount was a withdrawal by her husband, not a deposit. The Tribunal found that the AO had mistaken a withdrawal entry as a deposit and held that section 68 could not be applied to withdrawals. Therefore, the addition was deleted.

Addition of ?1,25,00,000 as Advance Received:
The AO added ?1,25,00,000 (?75,00,000 from Shri Venkatesh Gowda and ?50,00,000 from Shri Rajanna) as unexplained cash credits. The assessee provided sale agreements and confirmation letters showing these amounts were advances received by her husband for the sale of agricultural lands. The Tribunal noted that the AO did not verify the purchasers or the transactions and relied on suspicion and surmises. The Tribunal held that the assessee had discharged her burden by providing necessary evidence and that the AO’s requirement to prove the source of the source was not justified. Consequently, the addition was deleted.

Addition of ?28,00,000 as Unexplained Cash Deposit:
The AO added ?28,00,000 as unexplained cash deposits. The assessee explained that this amount was part of a ?50,00,000 advance received by her husband from N. Gopalaiah, which the AO had accepted. The Tribunal found the explanation reasonable and held that the source of the ?28,00,000 deposit was adequately explained. Therefore, the addition was deleted.

Conclusion:
The Tribunal allowed the appeal, deleting all the additions made under section 68 of the Act. The judgment emphasized the importance of proper verification by the AO and the need for substantial evidence before making additions under section 68. The Tribunal refrained from addressing other grounds of appeal as they were academic in nature.