2022 (1) TMI 95 - AT - Income Tax

Unexplained cash deposits - source of income - Addition on account of cash deposited in Bank treating the same as income from undisclosed sources - HELD THAT - We are unable to persuade ourselves to subscribe to their view that the assessee had not received any part of the sale proceeds qua the sale of the properties in question prior to the date of execution of the respective sale deeds. CIT(A) had clearly admitted that the sale deeds did mention about the money having been given in advance. But after so observing, the CIT(A), was of the view, that as the sale deeds were silent as to when and in what manner the sale consideration was given to the assessee as an advance, therefore, his unsubstantiated claim of having received part/full sale consideration qua sale of the properties in question did not merit acceptance. Insofar the reasoning given by the CIT(A) for declining the assessee s claim of having sourced part of the cash deposits in his bank accounts out of the part/full sale consideration qua the sale of the properties in question that were received prior to the date of execution of the respective sale deeds, we are afraid that the same is based on a half-hearted approach by him to the issue in hand. Having observed that the sale deeds did make a mention about money given to the assessee in advance, the CIT(A), in our considered view could not have summarily rejected the assessee s claim of having received part/full sale consideration prior to the date of the execution of the respective sale deeds. Apart from that, we find that it is not even the case of the department that the sale consideration received by the assessee on sale of the respective properties had been channelized by him for making some other investment and/or incurring of any other expenditure. Our aforesaid conviction that the lower authorities before rejecting the assessee s claim of having received the sale consideration prior to the execution of the respective sale deeds ought to have carried out necessary verifications from the purchasers is all the more strengthened by the fact that the CIT(A) had himself admitted that the sale deeds did make a mention about the money being given in advance - we are of the considered view, that there is substance in the claim of the assessee of having received part/full sale consideration qua sale of the properties in question and the same had wrongly been rejected by the lower authorities. We, thus, in the backdrop of our aforesaid observations set-aside the order of the CIT(A) and vacate the addition made by the A.O. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of cash deposits amounting to ?55,01,000 in the assessee's bank accounts.
2. Validity of the explanation provided by the assessee regarding the source of these cash deposits.

Issue-wise Detailed Analysis:

1. Legitimacy of Cash Deposits:
The primary issue in this case revolves around whether the lower authorities were justified in concluding that the assessee failed to explain the source of cash deposits totaling ?55,01,000 in his bank accounts. The Assessing Officer (A.O.) observed that the assessee had made significant cash deposits in two bank accounts but did not provide a satisfactory explanation for the source of these funds. Consequently, the A.O. treated the amount as unexplained income and added it to the assessee’s returned income.

2. Validity of Explanation Provided by the Assessee:
The assessee contended that the cash deposits were sourced from the sale proceeds of two properties and cash in hand. During appellate proceedings, the assessee submitted additional evidence, including sale deeds, a cash flow statement, and bank statements. The CIT(A) called for a remand report from the A.O. to verify these claims.

A.O.’s Findings:
- The A.O. rejected the claim of ?2,35,500 as opening cash in hand due to lack of substantiating evidence.
- The A.O. disputed the timing of the cash deposits, arguing that the sale proceeds were received at the time of sale deed execution, not earlier as claimed by the assessee.
- Specifically, the A.O. noted discrepancies in the dates of cash deposits and the execution of sale deeds, leading to the rejection of the assessee’s explanation.

CIT(A)’s Observations:
- The CIT(A) acknowledged that the sale deeds mentioned advances but found the assessee’s claim unconvincing due to the lack of clarity on the timing and manner of receiving these advances.
- The CIT(A) upheld the A.O.’s decision, citing the absence of corroborative evidence to support the assessee’s claims.

Tribunal’s Analysis and Decision:
- The Tribunal noted that the lower authorities had linked the receipt of sale consideration to the date of sale deed execution without considering the possibility of prior receipt.
- The Tribunal found merit in the assessee’s claim that the sale deeds mentioned advances, and there was no evidence to contradict this.
- The Tribunal criticized the lower authorities for not verifying the claims with the property purchasers, which could have clarified the timing of the receipt of sale proceeds.
- The Tribunal concluded that the lower authorities had erred in summarily rejecting the assessee’s explanation without thorough verification.
- Consequently, the Tribunal set aside the CIT(A)’s order and vacated the addition of ?55,01,000 made by the A.O.

Conclusion:
The appeal of the assessee was allowed, and the addition of ?55,01,000 was vacated. The Tribunal emphasized the need for proper verification of claims and found that the lower authorities had not adequately substantiated their rejection of the assessee’s explanation. The decision underscores the importance of thorough investigation and evidence-based conclusions in tax assessments.