2016 (9) TMI 919 - AT - Income Tax

Unexplained cash credits - addition u/s 68 - Held that - It has come on record that four out of these six persons had agricultural land ownership in their names since they placed on record their 7/12 and 8A certificates to name a few. The Assessing Officer took note of the fact that two persons could not prove their land title. The assessee proved in the course of lower appellate proceedings that these two farmers were joint owners of the land. There is further no dispute that the assessee duly accounted for land purchases in financial year 2006- 07 and there is neither any purchase agreement nor cancellation thereof in writing. It is therefore clear that these six vendors have returned their advances to the assessee in the impugned assessment year. Ld. CIT(A) further records a finding a fact that the assessee successfully linked the payment in question in case of each party. The extra-ordinary circumstance forming primary reason of cash payment is that there were some DRT proceedings wherein the assessee was in urgent need of money. We notice that all the relevant evidence forms part of the case file. Revenue fails to rebut any of the CIT(A) s findings with the help thereof. We find no reason to interfere in well reasoned lower appellate findings. This first substantive ground fails accordingly. Learned Departmental Representative takes us to Assessing Officer s findings wherein Shri Amit Patel was found to have deposited the same amount in his bank account on the very day of issuing relevant cheque to the assessee after having received the same from two persons Shri Sandeep and Chhotubhai Patel to the tune of 5 lacs and 1 lacs; respectively. This argument fails to impress upon us as the same rather proves source of the assessee s source wherein all other evidence supports his case. We come to latter sum of 7 lacs. This case file reveals that the same amount came from one Shri Ramesh Narottam Patel as land advances received back. This also explains source of source in assessee s case. We further notice that the assessee in the instant case has already filed all income tax statements/returns along with their bank account. Both these persons are related to the assessee (supra). The Revenue does not controvert all these findings in the course of hearing before us. We conclude in these facts that the assessee has been able to prove identity genuineness and creditworthiness of its eight payers in question. We find no reason to reverse CIT(A) s order under challenge - Decided against revenue

Summary

Issues:
1. Correctness of deletion of section 68 addition of unexplained cash credits.
2. Revival of unexplained cash credits addition of ?13 lacs.

Issue 1: Correctness of deletion of section 68 addition of unexplained cash credits:
The appeal pertains to the assessment year 2008-09, challenging the deletion of section 68 addition of unexplained cash credits made by the Assessing Officer. The assessee, an individual, declared income and agricultural income in the return filed. The Assessing Officer noted cash deposits totaling ?39 lacs in the assessee's bank accounts and questioned the source. The assessee claimed to have advanced these sums to six persons for purchasing agricultural lands during the financial year 2006-07 through banking channels. The CIT(A) extensively analyzed the facts and submissions. The Assessing Officer's justifications for the addition included lack of agreements with the parties, absence of names in land ownership records, and failure to prove repayment capacity. The assessee provided affidavits, bank passbooks, certificates, and explanations for instant cash repayments. The CIT(A) found the submissions satisfactory, citing evidence of payments, identity, and reasons for cash transactions. The lower appellate authority directed the deletion of the addition, concluding that the requirements of section 68 were met. The Tribunal upheld the CIT(A)'s decision, emphasizing the genuineness and creditworthiness established by the assessee, dismissing the Revenue's appeal.

Issue 2: Revival of unexplained cash credits addition of ?13 lacs:
The second substantive ground of the Revenue sought to revive the addition of unexplained cash credits amounting to ?13 lacs, specifically ?7 lacs from one individual and ?6 lacs from another. The CIT(A) overturned the addition after considering confirmations, bank statements, and explanations provided by the assessee. The Revenue contended that the deposits were made on the same day as receiving funds from other parties, questioning the genuineness. However, the Tribunal found that the transactions were routed through banking channels and adequately explained. The Tribunal referred to legal precedents emphasizing the need for a proper enquiry before rejecting explanations. The assessee demonstrated the source of credits in their books, relieving them from proving the source of the source. The Tribunal upheld the CIT(A)'s decision, noting the satisfactory evidence provided by the assessee and the absence of contradictory evidence from the Revenue. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of ?13 lacs.

This judgment showcases a meticulous analysis of the evidentiary and legal aspects surrounding unexplained cash credits, emphasizing the burden of proof on the assessee and the necessity for a thorough examination by the tax authorities before making additions. The Tribunal's decisions were based on the sufficiency of evidence, compliance with legal requirements, and adherence to established legal principles, ultimately leading to the dismissal of the Revenue's appeal.