2021 (11) TMI 410 - AT - Income Tax

Addition u/s 68 - Unexplained accumulated cash in hand - cash received through Will - assessee has not proved the genuineness of the Will - assessee could not furnish documentary evidence to prove the genuineness of the transaction and creditworthiness of Aunt of the Karta of the Assessee HUF - HELD THAT - Sale agreement clearly indicates that there exists of cash to the extent of ₹5.06 crores with Late Mrs. Rekha K. Bhansali. This fact was brought to the notice of Ld. CIT(A) and also the AR of the assessee submitted in his written submission that this evidence was submitted before tax authorities and the tax authorities has not controverted the above existence of the sale agreement and we also noticed that even though the Assessing Officer expressed the non-genuinity of the Will based only on witness submission before him and we noticed that the Ld. CIT(A) rejected the submissions of the witness with the observation that the witness has admitted to frequent the house and office of the assessee from relevant period when the Will was executed. He identified the signature as his own but do not remember. CIT(A) observed that lameness of the witness cannot be the reasons to punish the assessee. It is fact on record that there exists Will agreement and the Will and the sale agreement confirming the existence of cash in hand with Late Mrs. Rekha K. Bhansali and subsequent distribution of the cash based on the Will to existing HUF and respective cash deposits in the bank account of the assessee clearly indicates that the assessee has proved the source of cash. It is not expected to bring on record, the genuineness of source of source of a deceased person. The assessee can prove only the source for the credit in its books of account. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A) and accordingly grounds raised by the Revenue are dismissed.

Issues Involved:
1. Genuineness of the Will of Mrs. Rekha K. Bhansali.
2. Creditworthiness of Mrs. Rekha K. Bhansali.
3. Validity of the addition of ?2,53,09,000/- as unaccounted income under Section 68 of the Income Tax Act, 1961.
4. Procedural lapses in the assessment order.

Detailed Analysis:

1. Genuineness of the Will of Mrs. Rekha K. Bhansali:
The Assessing Officer (AO) questioned the genuineness of the Will, citing that one of the witnesses, Shri Harry Ashar, did not remember the Will being signed in his presence, although he confirmed his signature. The AO treated the Will as bogus and added ?2,53,09,000/- as undisclosed income.

The Commissioner of Income Tax (Appeals) [CIT(A)] found that the AO's reasoning was based on suspicion and lacked solid proof. The witness confirmed his signature, and the validity of the Will, being a legal document, could not be questioned without substantial evidence. The CIT(A) concluded that the AO's claim was unsupported and based on a hunch.

2. Creditworthiness of Mrs. Rekha K. Bhansali:
The AO doubted the creditworthiness of Mrs. Rekha K. Bhansali, questioning her ability to have ?5.07 crores in cash. The assessee provided returns of income and a statement of affairs showing the cash balance. Additionally, a sale agreement dated 04.11.2012 indicated that Mrs. Rekha K. Bhansali had paid ?5.06 crores to the seller of a Tea Estate, supporting the existence of cash.

The CIT(A) noted that Mrs. Rekha K. Bhansali had been filing her returns regularly, showing an annual income of ?10-15 lakhs. The sale agreement and the Will confirmed her creditworthiness and the existence of the cash in question. The CIT(A) found that the AO failed to counter this evidence effectively.

3. Validity of the Addition under Section 68:
The AO added ?2,53,09,000/- as unaccounted income under Section 68, claiming the assessee failed to prove the genuineness of the transaction and the creditworthiness of Mrs. Rekha K. Bhansali. However, the CIT(A) observed that the AO did not specify the particular section under which the addition was made, a vital procedural lapse.

The CIT(A) emphasized that the burden of proof lies on the AO to establish the non-genuineness of the Will and the source of cash. The evidence provided by the assessee, including the Will and the sale agreement, was sufficient to prove the source of the cash. The CIT(A) concluded that the addition under Section 68 was unjustified.

4. Procedural Lapses:
The CIT(A) pointed out that the AO's assessment order was silent about the specific provisions of the Income Tax Act under which the addition was made. This omission was a significant procedural lapse, as it is essential to mention the violated section to fix the onus on the assessee.

The CIT(A) also noted that the AO did not bring on record the evidence submitted by the assessee, such as the sale agreement, which confirmed the existence of the cash. The AO's failure to consider this evidence and the procedural lapses highlighted the arbitrariness and lack of due diligence in the assessment process.

Conclusion:
The CIT(A) allowed the appeal, finding that the AO's addition of ?2,53,09,000/- as unaccounted income was based on insufficient evidence and procedural lapses. The evidence provided by the assessee, including the Will and the sale agreement, was sufficient to prove the source of the cash. The Revenue's appeal was dismissed, and the order of the CIT(A) was upheld.

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