2016 (8) TMI 905 - AT - Income Tax

Addition on account of cash credit under section 68 - Held that - We find that assessee has not produced any document which could rebut the findings of the Tribunal in order dated 14/05/2010. The assessee has not produced any receipt of advance payments by the proposed buyers. It is seen from the page 31 of the paper book that the cash was deposited in the bank accounts from 03/09/2004 to 23/03/2005, i.e., for a period of almost sevenmonth. The assessee has not been able to explain before us why it did not deposit entire amount in bank accounts immediately after receipt from the proposed buyers. In view of the above facts and circumstances, the genuineness of the transaction is doubtful and the assessee has failed to discharge its onus with regard to the genuineness of the transaction. Further from the Income-tax return of Sh. Anuj Garg, who was the proposed buyer (Page 8 of the assessee s paper book), it is seen that his total income in assessment year 2004-05 was only ₹ 1,48,185/-. Similarly, total income of Rajendra Kumar Garg (Page 10 of the assessee paper book ) was only ₹ 1,54,000/-. Further the total income of another proposed buyer Sh. Gaurav Gupta (page 11 of the assessee paper book) was merely ₹ 69,616/-. No evidence in support of income of Sh. Dinesh Gupta is filed in the paper book submitted by the assessee. No other documents evidencing the financial capacity of the proposed buyer to advance the money were submitted. Looking to the amounts of total income of the proposed buyers, the creditworthiness of the creditors is also not getting established. Thus the assessee has failed to discharge its onus in respect of the genuineness of the transaction as well as creditworthiness of the creditors and, therefore, in our opinion the Ld. Commissioner of Income-tax (Appeals) was not justified in deleting the addition made by the Assessing Officer under section 68 of the Act for the peak amounts of deposits in bank accounts, accordingly we set aside the order of the ld. Commissioner of Incometax (Appeals) and restore the order of the ld. Assessing Officer. - Decided against assessee

Summary

Issues Involved:
1. Deletion of addition of ?36,80,000/- made by the Assessing Officer on account of cash credit under section 68 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?36,80,000/- under Section 68 of the Income-tax Act, 1961

Background:
The Revenue's appeal arose from the judgment of the Hon’ble High Court of Delhi, which remitted the matter back to the Tribunal for fresh consideration. The core issue was the deletion of an addition of ?36,80,000/- made by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income-tax Act, 1961.

Assessing Officer's Findings:
The AO observed that the assessee had deposited cash amounting to ?92,80,000/- in bank accounts held in the names of the assessee and his minor sons. The peak cash credit was calculated to be ?36,80,000/-, which was added as unexplained cash credit due to the lack of a satisfactory explanation from the assessee.

Assessee's Explanation before CIT(A):
The assessee contended that the deposits were from an advance received for the sale of a property, which ultimately did not materialize, resulting in the return of the advance. The assessee provided various documents, including sale agreements, confirmation letters, and bank statements, to support this claim.

CIT(A)'s Decision:
The CIT(A) accepted the assessee's explanation and deleted the addition, concluding that the assessee had satisfactorily explained the transactions.

Tribunal's Initial Decision:
The Tribunal initially set aside the CIT(A)'s order, reinstating the AO's addition. The Tribunal found the sale agreement to be an afterthought and noted the lack of evidence connecting the deposits to the alleged advance. The Tribunal also found it implausible that the buyers, who could pay 75% of the sale consideration, could not arrange the remaining 25%.

High Court's Remand:
The High Court remitted the matter back to the Tribunal, noting that the appeal was heard without the paper book and without giving the assessee a chance to file necessary documents.

Tribunal's Decision on Remand:
Upon rehearing, the Tribunal reviewed the additional documents submitted by the assessee, including sale agreements, confirmations, and bank statements. The Tribunal noted the following:
- The assessee failed to produce receipts for the payments made by the buyers.
- There was no evidence of the cancellation of the sale agreement.
- The cash deposits were spread over several months, which was inconsistent with the claim of a one-time advance.
- The financial capacity of the buyers to advance such a large amount was not established, given their modest income levels.

Conclusion:
The Tribunal concluded that the assessee failed to discharge the onus of proving the genuineness of the transactions and the creditworthiness of the creditors. Therefore, the Tribunal set aside the CIT(A)'s order and restored the AO's addition of ?36,80,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961.

Final Judgment:
The appeal of the Revenue was allowed, and the decision was pronounced in the open court on 8th July 2016.