2023 (8) TMI 23 - AT - Income Tax

Addition u/s 68 - cash deposit in his savings bank account remains unexplained - Assessee explained to be agricultural income - HELD THAT - As the agricultural income was not denied and he has explained source as he is the owner of agricultural land of 15 acres which was not controverted by AO in his assessment order or CIT(A) or now by the Senior DR before me, except creating some suspicion. We accept this credit as explained for the reason that the assessee has sources of earning i.e., agricultural income from 15 acres of land. Hence, addition of cash credit of Shri P. Karthikeyan is deleted hereby. Cash credit from Shri P. Sakthivel - Going by the ownership of land that Shri P. Sakthivel s grandfather and mother was the owner of 5 acres of land and Shri M. Muthukumar is owner of 3.2 acres of land, it is not possible to have accumulated Rs. 8,00,000/- each for advancing this amount for purchase of land. However going by the status and holding of land, I estimate that both might have saved a sum of Rs. 4,00,000/- each and advanced these for purchase of land to the assessee. I estimate the balance undisclosed income at Rs. 8,00,000/-. Accordingly, I estimate the explained money of these two cash credits namely Shri P. Sakthivel and Shri M. Muthukumar of Rs. 8,00,000/- and balance Rs. 8,00,000/- to be treated as unexplained. Appeal filed by the assessee is partly-allowed.

Summary

Issues:
- Delay in filing the appeal
- Addition of unexplained cash deposit under section 68 of the Income Tax Act

Issue 1: Delay in filing the appeal

The appeal by the assessee was delayed by 35 days beyond the prescribed timeline of 60 days for filing. The delay was attributed to a mistake by the office of the Chartered Accountant, resulting in the appeal being filed late. The assessee filed an affidavit for condonation of delay, explaining the circumstances. The Tribunal, after examining the reasons for the delay as stated in the affidavit, found them reasonable. The delay was condoned, and the appeal was admitted.

Issue 2: Addition of unexplained cash deposit under section 68 of the Income Tax Act

The Assessing Officer (AO) had made an addition of Rs. 24,00,000 as unexplained cash credit under section 68 of the Act, based on cash deposits made by the assessee in the bank account. The assessee claimed that the cash deposits were from advances received for the sale of agricultural land. Three individuals had advanced Rs. 8,00,000 each to the assessee, as per agreements dated 11.09.2014. The AO required these individuals to appear and provide explanations. Statements of these individuals revealed details of their agricultural activities, income, and sources of funds.

The AO and the Commissioner of Income Tax (Appeals) upheld the addition, considering human probabilities. However, the Tribunal analyzed the details provided by the individuals. For one individual, owning 15 acres of agricultural land and having an income of 2 to 3 lakhs per annum, the Tribunal accepted the explanation and deleted the cash credit of Rs. 8,00,000. For the other two individuals, considering their land holdings and income, the Tribunal estimated that they could have saved only a portion of the advanced amount. It directed the AO to accept Rs. 16,00,000 as explained money and treat the balance of Rs. 8,00,000 as unexplained cash credit under section 68 of the Act.

In conclusion, the appeal filed by the assessee was partly allowed, with the Tribunal making adjustments to the addition of unexplained cash deposits based on the explanations provided by the individuals involved in advancing the funds for the purchase of agricultural land.