2012 (7) TMI 328 - AT - Income Tax

Addition on account of unexplained income - deal between the assessee and Mr. Anton B. Rodrigues could not be finalised due to dispute in the title of the property and the same was cancelled vide cancellation Deed dated 10-11-2006. Mr. Anton B. Rodrigues returned the amount of Rs. 15 lacs to the assessee in three installments of Rs. 5 lacs each Held that - Action of the adding back Rs. 15 lacs to the income of the assessee as unexplained cash deposit in the bank account is not in order as all the necessary documents proving the cash deposit in the bank account is out of the explained sources addition deleted

Summary

Issues:
1. Addition of Rs. 15 lacs made by AO in assessment order.
2. Source of three deposits of Rs. 5 lacs each in the bank account of the assessee.
3. Dispute over the title of the property and cancellation of the deal.
4. CIT(A) deleting the addition made by AO under section 68 of the I.T. Act.

Analysis:
1. The AO questioned the source of three deposits of Rs. 5 lacs each in the bank account of the assessee in November 2006. The assessee explained that the deposits were made after receiving back Rs. 15 lacs from a cancelled land purchase deal. The AO, however, added the amount to the income of the assessee under section 68 of the I.T. Act.

2. The CIT(A) considered the documentary evidence provided by the assessee, including the agreement for the purchase of land, cancellation deed, and bank statements. The CIT(A) noted that the money received from M/s Housing Development and Infrastructure Ltd. was used to make the deposits and that the cancellation of the deal with Mr. Anton B. Rodrigues led to the return of Rs. 15 lacs in three installments, which were then deposited in the bank account.

3. The CIT(A) emphasized that there was no confusion regarding the receipt and deposit of the money, stating that all documents supported the transactions. The CIT(A) found that the AO had not provided any evidence contradicting the explanations and documents provided by the assessee. Therefore, the CIT(A) concluded that the addition made by the AO was unjustified and deleted the same.

4. The ITAT Mumbai, after reviewing the facts and the CIT(A)'s order, upheld the decision to delete the addition of Rs. 15 lacs. The ITAT found no reason to disturb the CIT(A)'s findings, as the case was heavily reliant on documentary evidence supporting the transactions. Consequently, the ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision.

In conclusion, the judgment highlights the importance of providing detailed documentary evidence to support financial transactions and emphasizes the need for tax authorities to consider all evidence presented before making additions to an assessee's income.