2022 (11) TMI 463 - AT - Income Tax

Unexplained cash deposits - CIT(A) not accepting the contention of appellant that cash received was against sale of property and same to be treated as Income from Capital gain and not from unexplained cash credit - HELD THAT - As in this case the material facts strongly indicate a probability that, the appellant had occasioned to receive on-money (cash) in the sale transaction of capital asset, and another very strong probable factor is that the said cash was deposited into bank account after the occurrence of sale transaction. The probable factors could have gone against the appellant only if deposits would have been anterior to said sale transaction. Insofar as the revenue s action is concerned, at least something extra and weighing would have been unearthed over and above the financial information received in AIMS module / ITD system in order to draw presumption so has to conclude income by way of cash credit u/s 68 of the Act. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that, said amount of cash deposit(s) is actually untaxed income credited in the form of cash credit. It is quite a trite law that suspicion how so ever strong may be but cannot be the basis of addition except for some material evidence brought on record. The theory of preponderance of probability‟ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side, and conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts Once nothing has been proved against the appellant with aid of any direct material especially when three rounds of investigation have been carried out, then nothing can be implicated against the appellant. We find force in the submission of the appellant, and for the reason we set aside the order of both the tax authorities below, and direct the Ld. AO to treat the said cash deposits as integral part of sale consideration received and reframe the assessment in the light of chapter IV-E of the Act, ergo we order accordingly.

Summary

Issues Involved:
Adjudication of taxability of onmoney received on the transfer of a capital asset.

Detailed Analysis:

1. Adjudication of Taxability of Onmoney Received on Transfer of Capital Asset:
The appeal challenged the order of the Commissioner of Income Tax (Appeals) regarding the treatment of an amount deposited in a bank account as unexplained cash deposits. The appellant contended that the cash received was against the sale of a property and should be treated as income from capital gain, not from unexplained cash credit. The appellant failed to file the return of income for the assessment year, leading to proceedings initiated by the Assistant Commissioner of Income Tax. Despite providing various documents, the appellant could not substantiate the claim of borrowings made against the cash deposit. The first appellate authority upheld the addition made by the assessing officer under section 68 of the Income-tax Act. During the hearing, the appellant argued that the cash deposits were from on-money generated on the sale of a capital asset and should be treated as part of the sale consideration for capital gain tax. The Revenue, however, opposed this argument, stating that the appellant failed to substantiate the borrowings made. The Tribunal considered the facts and legal position, emphasizing the need for evidence to support any addition under section 68. The Tribunal found in favor of the appellant, setting aside the orders of the lower authorities and directing the assessing officer to treat the cash deposits as part of the sale consideration and reframe the assessment accordingly under Chapter IV-E of the Act.

2. Condonation of Delay in Filing Appeal:
The Tribunal addressed the delay of 45 days in filing the appeal and, considering the reasons provided by the appellant, condoned the delay citing relevant legal precedents. The decision was made in the interest of justice based on established legal principles.

In conclusion, the Tribunal allowed the appeal of the appellant for statistical purposes, directing the assessing officer to reframe the assessment considering the cash deposits as part of the sale consideration for the capital asset, thereby resolving the issue of taxability of onmoney received on the transfer of the capital asset.