2017 (8) TMI 269 - AT - Income Tax

Unexplained source of cash deposit - addition u/s 68 - Held that - The assessee has claimed that the advances received have been repaid back in the months of October and November 2010 as the transaction did not go through. On a consideration of the facts, it is of the view that relevant facts have not been thrashed out by the tax authorities. Evidently there was a specific piece of land belonging to the assessee and there was an Agreement to Sell entered into by the assessee with Sh.Suresh Chand Yadav. If his signature is found therein and the entering into of the transaction is supported by an affidavit of the Sh.Suresh Chand Yadav, then there was no reason for the Revenue not to address the availability of funds in the hands of the Sh.Suresh Chand Yadav from his father s agricultural activity. How the assessee can be held responsible for the financial affairs and the explanation offered by Sh.Suresh Chand Yadav is not brought out in the orders. As per the facts on record, the ownership of a specific land/plot in the hands of the assessee is not doubted. The other party signatory of the Agreement to Sell Sh.Suresh Chand Yadav is identified who explains the source but does not appear on the only one opportunity provided to him. The parties are not related the amounts are stated to be repaid back on specific dates prior to the filing of the return itself. The return as per record was filed on 20.03.2012 and the amounts are claimed to be repaid by cheques on specific dates in October and November in 2010. Accordingly, find that subject to verification that the amounts have been repaid on specific dates back to Sh. Suresh Chand Yadav the addition per se cannot be sustained. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Correctness of the order confirming addition made by the Assessing Officer under section 68 of the Act.
2. Failure to appreciate the discharge of onus by the appellant under section 68.
3. Ignoring the fact that the appellant could not be expected to prove the source of source.
4. Confirmation of addition under section 68 despite the return of advance by the prospective buyer through bank in the same financial year.

Analysis:
1. The appeal was filed challenging the order confirming the addition made by the Assessing Officer under section 68 of the Act. The appellant argued that the order was arbitrary, biased, and bad in law. The Assessing Officer found discrepancies in the bank account of the assessee, leading to scrutiny of the case.

2. The appellant contended that the addition under section 68 was unjust as the onus of proof had been discharged regarding the receipt of advance against the proposed sale of property. The appellant claimed that the funds were received from a specific plot sale and presented a detailed explanation with supporting documents.

3. Despite the appellant's explanation and evidence, the CIT(A) confirmed the addition under section 68, stating that the appellant failed to prove the ultimate source of the funds. The appellant argued that it was unreasonable to expect proof of the source of the source of funds.

4. Additionally, the appellant highlighted that the advance received in cash from the prospective buyer was returned through a bank transaction in the same financial year. This fact was disregarded by the Assessing Officer and the CIT(A) while confirming the addition under section 68.

5. The CIT(A) considered the submissions made by the appellant, including the sale agreement and communication with the Assessing Officer of the source of funds. The appellant provided details of the repayment of the amounts received as advance, indicating that the transaction did not materialize.

6. The Tribunal observed that the tax authorities did not thoroughly investigate the case, especially regarding the availability of funds with the buyer. The Tribunal emphasized the need to verify the repayment claims and the ownership status of the specific plot involved. The order was set aside, and the issues were remanded to the Assessing Officer for further examination.

7. Ultimately, the appeal of the assessee was allowed for statistical purposes, and the case was sent back to the Assessing Officer for verification and clarification on the repayment of the advance amounts and the ownership status of the property in question.