2017 (4) TMI 1148 - AT - Income Tax

Addition u/s 68 - source of cash deposits - credit for agricultural income - Held that - By using the words may be charged , instead of shall be charged, it is clear that addition u/s. 68 is not mandatory. On the other hand the Assessing Officer has to apply his mind on facts of each case and decide whether the addition is warranted. As mentioned earlier, the assessee is an aged person, who had settled down in his native place. He was engaged in agricultural activities on his retirement and there is nothing on record to suggest that the assessee alongwith his wife were in a position to generate unaccounted income of ₹ 39 lakhs other than on-money on account of sale of agricultural land. The payment of on-money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside. Place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO vs. Dr. Koshy George (2009 (6) TMI 121 - ITAT COCHIN), wherein it was held by the Tribunal that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself. - Decided against revenue.

Summary

Issues:
1. Interpretation of cash deposits in bank account as unexplained income.
2. Treatment of additional cash deposits as income from other sources.
3. Application of section 68 of the Income Tax Act regarding unexplained credits.

Interpretation of cash deposits in bank account as unexplained income:
The case involved an individual assessee who declared a total income of ?71,430 for the assessment year 2013-14. The Assessing Officer questioned the source of cash deposits amounting to ?80 lakhs in the Federal Bank. The assessee claimed that the amount was from the sale of agricultural land. However, the Assessing Officer found the sale proceeds mentioned in the sale deed to be only ?30,59,500. The remaining amount was treated as unexplained income. The Tribunal upheld this decision based on the legal principle that only the amount mentioned in the sale deed can be considered the legally approved value of the property. The balance amount was deemed unaccounted income and taxed accordingly.

Treatment of additional cash deposits as income from other sources:
The assessee appealed to the CIT(A), arguing that the entire cash deposit in the bank was from the sale of agricultural land and should not be taxed as income from other sources. The CIT(A) referred to a previous Tribunal decision where it was held that surplus money from the sale of agricultural land should be treated as agricultural income. The CIT(A) accepted the assessee's claim, stating that the additional cash deposits were part of the sale proceeds of agricultural land and thus exempt from tax. The Tribunal agreed with this interpretation, noting that the buyers reduced the sale consideration in the deed to save on stamp duty, leading to the additional cash deposits.

Application of section 68 of the Income Tax Act regarding unexplained credits:
The Tribunal analyzed the application of Section 68 of the Income Tax Act, which allows unexplained sums credited to an assessee's account to be taxed as income if no satisfactory explanation is provided. In this case, the Tribunal found that the assessee, an elderly retired individual engaged in agricultural activities, did not have any other significant source of income to generate the unexplained amount. The Tribunal emphasized that the Assessing Officer must apply discretion in deciding whether to tax such amounts under Section 68. Ultimately, the Tribunal upheld the CIT(A)'s decision, ruling that the additional cash deposits were not unexplained income but part of the sale proceeds of agricultural land and hence not taxable.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision regarding the treatment of the additional cash deposits from the sale of agricultural land and emphasizing the specific circumstances of the case in determining the taxability of such amounts.