2022 (5) TMI 830 - AT - Income Tax

Unexplained cash credit/unexplained income - CIT-A confirming the addition made by the AO on account of cash deposited by the assessee in the bank account - HELD THAT - Admittedly, there was no doubt raised by the authorities below with respect to the lands held by the assessee in his individual capacity and as joint ownership. Therefore, the possibility of agricultural income cannot be ruled out in entirety merely on the reasoning as pointed out by the CIT-A, which have been reproduced somewhere in the preceding paragraph. Though, the reasons given by the learned CIT-A appears to be valid for not having agricultural income in the hands of the assessee, but such reasoning cannot overlook the fact of the land held by the assessee in his individual and joint owner capacity. Thus entire amount of cash deposit of ₹9.22 lakhs cannot be treated as income from other sources. In our considered opinion, justice shall be served to the assessee as well as to the revenue if the sum of ₹5 lakhs out of the total cash deposit of Rs. 9.22 lakhs is treated as income from agricultural operations and the remaining amount as income from other sources. Hence the 1st ground of appeal of the assessee is partly allowed. With respect to the addition of ₹ 26,59,255.00, we note that the assessee has filed the additional evidences before us which are available on record. We have perused the additional evidences and note that the consideration of these additional evidences at the level of the AO is essential. Accordingly, we exercise our power granted under rule 29 of ITAT rules and admit the additional evidence filed by the assessee. Thus in the interest of justice and fair play, we remit the issue to the file of the AO for fresh adjudication as per the provisions of law and after considering the additional evidences filed by the assessee. Hence the 2nd ground of appeal of the assessee is allowed for the statistical purposes.

Summary

Issues Involved:
1. Addition of Rs. 9,22,000 as unexplained cash credit under Section 68 of the Income Tax Act.
2. Addition of Rs. 26,59,255 as unexplained cash credit under Section 68 of the Income Tax Act.
3. Confirmation of aggregate addition of Rs. 35,81,225 and rejection of peak credit offered to tax of Rs. 6,81,278.

Issue-wise Detailed Analysis:

1. Addition of Rs. 9,22,000 as Unexplained Cash Credit:
The assessee claimed that Rs. 9,22,000 deposited in the bank account was agricultural income, supported by 7/12 extract forms and bills from a commission agent. However, the AO found the bills suspicious due to consecutive numbering and the cancellation of the commission agent's TIN-VAT number. The AO treated the amount as income from undisclosed sources. Upon appeal, the assessee provided additional evidence, and the AO, in a remand report, accepted the agricultural income claim. Despite this, the CIT(A) rejected the remand report, citing the commission agent's non-appearance and the unusual absence of agricultural expenses. The ITAT, acknowledging the land held by the assessee, partially accepted the agricultural income claim, treating Rs. 5 lakhs as agricultural income and the remaining Rs. 4.22 lakhs as income from other sources.

2. Addition of Rs. 26,59,255 as Unexplained Cash Credit:
The AO initially treated Rs. 26,59,255 as income from undisclosed sources due to insufficient explanation. In the remand report, the AO accepted the assessee's claim that the cash came from relatives for share investments, supported by statements and confirmations from some parties. However, the CIT(A) rejected the remand report, questioning the necessity of cash transactions when bank transfers were possible and noting inconsistencies in the cash book. The ITAT admitted additional evidence provided by the assessee and remitted the issue back to the AO for fresh adjudication, emphasizing the need for a thorough review of the new evidence.

3. Confirmation of Aggregate Addition and Rejection of Peak Credit:
The CIT(A) confirmed the aggregate addition of Rs. 35,81,225, rejecting the peak credit of Rs. 6,81,278 offered by the assessee. The CIT(A) highlighted discrepancies in the cash book, such as negative cash balances and unusual cash holdings, which contradicted the assessee's claims. The ITAT, while addressing the individual components of the aggregate addition, did not specifically alter the CIT(A)'s stance on the peak credit but focused on reassessing the sources of the cash deposits.

Conclusion:
The ITAT partially allowed the appeal, treating Rs. 5 lakhs as agricultural income and remitting the issue of Rs. 26,59,255 back to the AO for fresh adjudication with the additional evidence provided. The appeal was partly allowed for statistical purposes, emphasizing a balanced approach to justice and fair play.