2014 (2) TMI 261 - AT - Income Tax

Addition made u/s 69A of the Act unexplained money Held that - Several transactions through banking channel were carried out in their bank accounts in several lacs to prove that they were regularly getting the amounts on clearance and were withdrawing - it is proved on record that the purchasers were having creditworthiness to make advance with the assessee for purchase of land - The genuineness of the transaction could not be disputed - the assessee has been able to satisfy the conditions of section 69A of the IT Act - advance in the form of cash amount have been shown as receipts from number of parties all residents of New Delhi towards proposed site of flats in city of Jaipur in the residential scheme stated to have been floated by the assessee in the names of Sunder Nagar Scheme and Radha Vihar Scheme - The assessee filed all the affidavits of the depositors confirming the transactions with the assessee, copies of IT returns to show their source of income - The allotment of flats and refund of amount letters were also filed - All the depositors have also confirmed their transactions with the assessee independently through their replies filed u/s. 133(6) of the IT Act - the assessee genuinely entered into the transaction with the buyers order of the CIT(A) set aside and the addition of 30 lacs deleted Decided in favour of Assessee.

Summary

Issues Involved:
1. Addition of Rs. 30 lacs under Section 69A of the Income Tax Act.
2. Creditworthiness and identity of the purchasers.
3. Genuineness of the transaction.

Detailed Analysis:

1. Addition of Rs. 30 lacs under Section 69A of the Income Tax Act:
The core issue in this appeal is the addition of Rs. 30 lacs made by the Assessing Officer (AO) under Section 69A of the Income Tax Act, which pertains to unexplained money. The AO discovered that Rs. 30 lacs was deposited in the assessee's bank account on 31.01.2009 and demanded an explanation for the source of this cash deposit. The assessee claimed that the amount was received as an advance for the sale of agricultural land from three individuals. However, the AO found that the creditworthiness of these individuals was not satisfactorily established, leading to the addition of Rs. 30 lacs as unexplained money.

2. Creditworthiness and Identity of the Purchasers:
The assessee contended that the amount was received from three individuals as an advance for the sale of agricultural land. The AO required these individuals to be produced for verification. Only one individual, Shri Sobran Singh, was produced, whose creditworthiness was found lacking. The other two individuals were not produced, and their creditworthiness and identity could not be established. The AO's independent inquiry also suggested that these individuals were not capable of making such payments. The assessee argued that the purchasers were agriculturists with sufficient land holdings and had provided affidavits confirming the transactions. The CIT(A) and the Tribunal examined the bank accounts and transactions of these individuals, ultimately finding that they had the creditworthiness to make the advance payments.

3. Genuineness of the Transaction:
The assessee claimed that the advance was received for the sale of agricultural land, which was later refunded through banking channels when the deal was canceled. The CIT(A) questioned the genuineness of the transaction due to the absence of a written sale agreement and the routing of refunded amounts through the bank account of Smt. Shivdhara's husband. The Tribunal, however, noted that there is no legal requirement for a written agreement for such transactions and that oral agreements are permissible. The Tribunal found that the purchasers had confirmed the transactions under oath, and the refunded amounts were verified through bank records. The Tribunal concluded that the assessee had satisfactorily explained the source of the deposit and that the transactions were genuine.

Conclusion:
The Tribunal set aside the orders of the lower authorities, finding that the assessee had adequately explained the source of the Rs. 30 lacs deposit. The Tribunal emphasized that the assessee had proved the genuineness of the transaction and the creditworthiness of the purchasers. Consequently, the addition of Rs. 30 lacs under Section 69A was deleted, and the appeal of the assessee was allowed.