2017 (11) TMI 795 - AT - Income Tax

Addition of opening cash balance by treating the same as unexplained income of the assessee u/s 68 - Held that - Assessee has opened a bank account with Axis Bank on 19.01.2013. In this bank account, there is a deposit of ₹ 3,10,000/- in the month of February, 2013. Out of it, ₹ 2,73,000/- was withdrawn between 13.02.2013 to 28.02.2013 and ₹ 1,60,000/- is deposited back on 13.03.2013 in the bank. Thus, the cash withdrawal for the month of February, 2013 is ₹ 1,13,000/- (Rs. 2,73,000 minus ₹ 1,60,000). In the month of March, 2013, assessee has withdrawn ₹ 1,94,500/-. Thus, the total withdrawal made from the bank account in February & March, 2013 is ₹ 3,07,500/- (Rs.1,13,000 ₹ 1,94,500). It is also noted that assessee is regularly assessed to tax and in the Balance Sheet as on 31.03.2013, there is cash in hand of ₹ 4,95,222/- (PBP 15). In these facts and circumstances of the case, I do not find any justification in restricting the claim of opening cash in hand at ₹ 1,50,000/- only. The AO is therefore, directed to accept the claim of opening cash in balance of ₹ 4,95,222/-. Hence, the addition confirmed by ld. CIT(A) is deleted by allowing the ground No. 1 of the assessee. Addition treating the loan received as unexplained u/s 68 - Held that - As the identity, creditworthiness and genuineness of the transaction is established and therefore, the addition is directed to be deleted. Thus ground No. 2 of the assessee is allowed. Addition treating the advance received from Shri Jay Ssingh and Smt. Manju Singh against sale of property as unexplained income of the assessee u/s 68 - Held that - It is noted that that assessee has received advance from Sh. Jai Singh and Sh. Manju Singh against agreement to sale dated 24.05.2013 in respect of his plot of land at Anirudh Nagar, Bharatpur (PBP 47-48). The AO has recorded statement of both Sh. Jai Singh and Smt. Manju Singh on 21.11.2016. From the extract of the statement reproduced in the assessment order, it is noted that in reply to Q. No. 18 & 19, Sh. Jai Singh has accepted that he and his brother Shivram through his wife Smt. Manju Singh has entered into an agreement with assessee for purchase of said plot for R.21 lacs of which ₹ 15 lacs was paid in advance out of the sale proceeds of agricultural produce and past savings. In Q. No.20, he explained that remaining amount would be paid when the plot is registered in their name. Thus, when both the persons have accepted having given advance to the assessee against sale of plot and in the absence of any contrary material to establish otherwise, the Bench finds no reason to confirm the addition. In this view of the matter, the addition confirmed by the ld. CIT(A) amounting to ₹ 15 lacs. is deleted. Thus allowing Ground No. 3 of the assessee

Summary

Issues Involved:
1. Addition of ?3,45,222/- out of opening cash balance as unexplained income u/s 68 of the Act.
2. Addition of ?9.00 lacs by treating loans from two individuals as unexplained income u/s 68 of the Act.
3. Addition of ?15.00 lacs by treating the advance received against the sale of property as unexplained income u/s 68 of the Act.

Issue-wise Detailed Analysis:

1. Addition of ?3,45,222/- out of Opening Cash Balance:
The assessee, a salaried employee, declared a total income of ?2,70,278/- for the year under consideration. The AO found cash deposits amounting to ?39,78,000/- in the assessee's bank account and questioned the source. The assessee provided a cash flow statement showing an opening cash balance of ?4,95,222/- but failed to provide concrete evidence. The AO treated this as unexplained income and added it under section 68 of the Act. The CIT(A) partially accepted the explanation, allowing ?1,50,000/- based on cash withdrawals in March 2013, but confirmed the addition of ?3,45,222/-.

Upon appeal, the Tribunal noted the assessee's regular tax filings and verified the cash withdrawals from the bank account, totaling ?3,07,500/- before the assessment year. The Tribunal also recognized the balance sheet showing ?4,95,222/- as cash in hand as of 31.03.2013. Citing precedents, the Tribunal concluded that the opening cash balance should not be treated as unexplained income and directed the AO to accept the full amount of ?4,95,222/-, thereby deleting the addition.

2. Addition of ?9.00 lacs by Treating Loans as Unexplained Income:
The assessee claimed to have received unsecured loans of ?7 lacs from one individual and ?2 lacs from another. Both loans were received through cheques, and confirmations were provided. However, the AO found cash deposits in the lenders' accounts before the loans were advanced and questioned their creditworthiness. The CIT(A) confirmed the addition, noting the lenders were not income tax assessees and had identical cash deposits before issuing the loans.

The Tribunal examined the evidence, including the lenders' financial activities and land holdings. For the ?7 lacs loan, the lender was an agriculturist with documented land holdings and income from agricultural produce and rent. The Tribunal found the transactions genuine and the creditworthiness established. For the ?2 lacs loan, the lender was a government teacher with a documented salary, confirming the transaction's genuineness. The Tribunal concluded that the identity, creditworthiness, and genuineness of both transactions were established and directed the deletion of the ?9 lacs addition.

3. Addition of ?15.00 lacs by Treating Advance Against Property Sale as Unexplained Income:
The assessee claimed to have received ?15 lacs as an advance for the sale of property to two individuals. The AO and CIT(A) questioned the transaction's genuineness due to the non-completion of the sale and the absence of repayment demands. The assessee provided a sale agreement and statements from the buyers confirming the advance payment from agricultural proceeds and savings.

The Tribunal reviewed the sale agreement and the buyers' statements, which corroborated the assessee's claim. The Tribunal found no contrary evidence to dispute the transaction's genuineness and concluded that the advance was not unexplained income. Consequently, the Tribunal directed the deletion of the ?15 lacs addition.

Conclusion:
The appeal was allowed in favor of the assessee, with all additions made by the AO and confirmed by the CIT(A) being deleted. The Tribunal emphasized the importance of concrete evidence and the proper application of section 68, ensuring that genuine transactions are not unfairly treated as unexplained income.