2022 (12) TMI 222 - AT - Income Tax

Addition u/s 68 - assessee had deposited the cash in the Bank A/c - genuineness and creditworthiness of the transaction not proved - as submitted that the amounts received towards construction of Flats and not as income. Since the assessee cannot do any business and was not doing any business, the amount cannot be treated as income of the society - HELD THAT - Since the amounts in question are not cash credits, the creditworthiness of the creditors is not required to be established. We find force in the submissions of the Learned Counsel for the Assessee. Assessee discharged its onus by proving the genuineness of the Members by filing confirmations before the Ld. CIT(A). Once the assessee furnishes sufficient documents and explanations, it is on the onus of Department to verify the same and act accordingly. Authorities below can summon the Members if they are not appeared on the request of assessee society, but, the authorities below cannot demand the assessee society to prove the source of the source which is one of the conditions stipulated under section 68 itself. There are plethora of judicial decisions on this issue. We, therefore, set aside the orders of the authorities below and delete the addition made by the A.O. and confirmed by the Ld. CIT(A). Appeal of assessee are allowed.

Summary

Issues:
1. Assessment of unexplained income from cash deposit.
2. Validity of reassessment proceedings under section 147/148.
3. Disallowance under section 68 of the Income Tax Act, 1961.
4. Condonation of delay in filing the appeal.

Assessment of Unexplained Income from Cash Deposit:
The case involved a Cooperative Group Housing Society that deposited a sum of Rs.11,50,000 in a bank account, leading to an addition of Rs.11,50,000 as unexplained income from undisclosed sources under "Income from other Sources." The Assessing Officer (A.O.) initiated penalty proceedings under section 271(1)(c) of the Income Tax Act. The Commissioner of Income Tax (CIT) upheld the addition made by the A.O. The appellant challenged this decision, arguing that the provisions of section 68 of the Income Tax Act were not applicable to the case. The appellant provided evidence of contributions received for construction purposes, asserting that the cash deposit was a small fraction of the total receipts and was used exclusively for flat construction. The Tribunal found that the appellant had proven the genuineness of the cash deposit and the source of funds, setting aside the lower authorities' orders and deleting the addition.

Validity of Reassessment Proceedings:
The A.O. reopened the case under section 148 of the Income Tax Act after receiving an AIR information about the cash deposit. The appellant contended that the initiation of reassessment proceedings under sections 147/148 was void ab initio. However, the Tribunal did not delve into this issue as the appeal was time-barred. The appellant's delay in filing the appeal was condoned due to the Covid-19 pandemic, following the Supreme Court's order extending the limitation period. The Tribunal proceeded to decide the appeal on its merits, disregarding the objections raised against the reassessment proceedings.

Disallowance under Section 68 of the Income Tax Act, 1961:
The A.O. made a disallowance of Rs.11,50,000 under section 68 of the Income Tax Act, placing the onus on the appellant to prove the genuineness and creditworthiness of the transaction. The appellant demonstrated that the cash deposit was part of contributions received for flat construction, supported by audited balance-sheets and member confirmations. The Tribunal held that the appellant had discharged its onus by providing sufficient evidence, emphasizing that the authorities could not demand proof beyond what was stipulated under section 68. Consequently, the addition made by the A.O. and affirmed by the CIT was deleted, allowing the appellant's appeal on this issue.

Condonation of Delay in Filing the Appeal:
The appellant's appeal was found to be time-barred by 146 days. However, the delay was condoned by the Tribunal in light of the Supreme Court's order extending limitation periods due to the Covid-19 pandemic. The Tribunal dismissed certain grounds of appeal that were not pressed and proceeded to adjudicate the remaining issues raised by the appellant. The delay condonation allowed the Tribunal to consider the appeal on its merits and deliver a partial success to the appellant.