2023 (5) TMI 1059 - AT - Income Tax

Unexplained cash deposits - AO has passed a remark that there exist other transactions of equivalent amounts from these persons and that it is not clear whether these amounts are also advances. The properties which have been purchased in the name of the assessee - CIT(A) deleted the addition on the grounds that the sources of the entire amounts, the credits and debits in the bank account have been duly explained - HELD THAT - There is no embargo in law to purchase a property from borrowed funds. The appellant has explained that the nature of income earned by him is solely that of commission/ brokerage, pension, interest and capital gains. While explaining his investment activities from which capital gains are earned in the year of sale, the appellant submitted that he makes investment in properties either from his own funds or from borrowed funds. Whenever such properties are sold, the resultant capital gains is offered to tax in the relevant assessment year. During the course of search, no incriminating evidence was discovered or seized to show that the credits of the appellant s bank statements were in the nature of income or that he was engaged in any other line of work. It is noteworthy that the appellant was required to explain the source of funds utilized for purchasing the said properties, which has been duly discharged by the appellant. A mere suspicion has been raised by the AO on such other credits of equivalent amounts, without seeking explanation of such other credits from the appellant. All credits appearing in his bank statement are duly explained, and the documentary evidence placed on record has been duly perused and examined. The source of investment made by the appellant during the year stands sufficiently explained. Decided against revenue.

Issues Involved:
1. Non-cooperation of the assessee during assessment proceedings.
2. Failure to explain debit/credit entries in bank accounts.
3. Non-maintenance of regular books of accounts.
4. Lack of opportunity for AO to counter new evidence.
5. Addition of Rs. 4,59,50,000/- on account of unexplained investment.

Summary of Judgment:

Issue 1: Non-cooperation of the Assessee
The Revenue contended that the assessee did not cooperate during the assessment proceedings by failing to provide details of all his bank accounts. The CIT(A) found that the time given to the assessee to explain the transactions was insufficient, leading to the deletion of the addition.

Issue 2: Failure to Explain Debit/Credit Entries
The AO noted substantial credits and cash deposits in the assessee's bank accounts, which were not explained due to the non-maintenance of regular books of accounts. The CIT(A) held that the provisions of Section 44AD could not be applied as the assessee's income was solely from commission or brokerage, which is excluded from Section 44AD.

Issue 3: Non-maintenance of Regular Books of Accounts
The AO computed the income of the assessee at 8% of the total receipts/credits under Section 44AD due to the absence of regular books of accounts. The CIT(A) found this application incorrect, as the turnover exceeded the threshold limit of Rs. 2,00,00,000 and the nature of income was commission or brokerage.

Issue 4: Lack of Opportunity for AO to Counter New Evidence
The Revenue argued that the CIT(A) did not provide an opportunity to the AO to counter new evidence filed by the assessee. The CIT(A) deleted the addition, noting that the AO did not bring any evidence to attract the provisions of Section 44AD to all credits in the assessee's bank statements.

Issue 5: Addition of Rs. 4,59,50,000/- on Account of Unexplained Investment
The AO added Rs. 4,59,50,000/- as unexplained investment under Section 69. The CIT(A) deleted this addition, noting that the sources of funds for property purchases were explained with documentary evidence such as confirmations, PAN details, and copies of accounts. The AO did not draw any adverse inference from these explanations.

Conclusion:
The ITAT upheld the CIT(A)'s order, finding no basis to interfere with the deletion of additions made by the AO. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 23/05/2023.

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