2013 (12) TMI 952 - AT - Income Tax

Unexplained sources of deposits - Held that - The sources of deposits in one account has been explained to be out of sale of sugarcane - Sufficient cash was available with the assessee for deposit in the joint account - The Assessing Officer has nowhere denied that assessee was owning 275 acres of land in which agricultural operations were conducted - Assessing Officer cannot deny the sources simply by saying that there is a gap of more than one month in the withdrawal of cash from one bank and deposit in another is not sufficient to doubt the sources - There can be various reasons for such a gap and the gap of 1 month is not a large gap so as to raise suspicion Decided in favour of assessee.

Issues Involved:
1. Determination of the sole beneficiary of the joint bank account.
2. Legitimacy of the addition of Rs. 10,00,000/- under sections 68 and 69 of the Income-tax Act.
3. Legitimacy of the addition of Rs. 6,50,000/- under sections 68 and 69 of the Income-tax Act.
4. Adequacy of the explanation and documentary evidence provided for the source of deposits.

Issue-wise Detailed Analysis:

1. Determination of the Sole Beneficiary of the Joint Bank Account:
The primary issue was whether the assessee was the sole beneficiary of the joint bank account held with his two brothers. The CIT(A) concluded that the assessee was the main operator and beneficiary of the account, noting that the assessee had withdrawn Rs. 15 lakhs for his business use without returning it. The CIT(A) found no evidence of the brothers operating the account or benefiting from it. The assessee argued that the account was used for agricultural operations and was jointly operated by all three brothers. The Tribunal found that the account was indeed a joint account as confirmed by the bank, and the brothers owned 275 acres of agricultural land generating income, which was deposited into this account.

2. Legitimacy of the Addition of Rs. 10,00,000/- under Sections 68 and 69 of the Income-tax Act:
The Assessing Officer (AO) added Rs. 10,00,000/- to the income of the assessee, suspecting unexplained sources for the deposits. The AO noted discrepancies in the explanations provided by the assessee regarding the sources of these deposits. The CIT(A) upheld this addition, concluding that the deposits were from unexplained sources. However, the Tribunal found that the sources of the deposits had been sufficiently explained through agricultural income and sale proceeds, supported by bank records and affidavits.

3. Legitimacy of the Addition of Rs. 6,50,000/- under Sections 68 and 69 of the Income-tax Act:
Similar to the first addition, the AO added Rs. 6,50,000/- to the assessee's income, citing unexplained sources. The CIT(A) agreed with the AO's findings. The Tribunal, however, noted that the assessee had provided a detailed summary of cash receipts and withdrawals, showing sufficient cash availability for the deposits. The Tribunal also considered the agricultural income and sale proceeds as legitimate sources, thus rejecting the addition.

4. Adequacy of the Explanation and Documentary Evidence Provided for the Source of Deposits:
The assessee provided various documents, including bank statements, affidavits, and a detailed summary of cash transactions, to explain the sources of the deposits. The CIT(A) and AO found these explanations insufficient, citing gaps between withdrawals and deposits and questioning the genuineness of the sale of a combine harvester. The Tribunal, however, found the explanations and documents adequate, noting that the agricultural income and sale proceeds were legitimate sources. The Tribunal emphasized that the AO did not sufficiently disprove the explanations and that the gaps in transactions were not significant enough to raise suspicion.

Conclusion:
The Tribunal found in favor of the assessee, setting aside the CIT(A)'s order and deleting the addition of Rs. 16,50,000/-. The Tribunal concluded that the joint bank account was indeed used for agricultural operations by all three brothers, and the sources of the deposits were sufficiently explained through agricultural income and sale proceeds. The appeal of the assessee was allowed, and the additions made by the AO under sections 68 and 69 were deleted.

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