2017 (12) TMI 1260 - AT - Income Tax

Unexplained investments - explanation of sources - Held that - It is an admitted fact that assessee opened the bank account on 09-03-2009 only and subsequently deposited cash to issue cheque/DDs to the said company for investment. It is also true that assessee has agricultural lands and agricultural income including amounts received on sale of agricultural lands, which are verifiable from the returns of earlier years. Thus, the source of agricultural income cannot be denied, just because assessee had not deposited the same in bank account. Considering the small town from which assessee hails and the fact that he is from agricultural family, the objections of AO and CIT(A) that these moneys are not deposited in bank and there was a gap can be rejected. Thus, the explanation for agricultural income and sale proceeds being a source, as explained before the CIT(A), can be accepted. Addition of gifts - Held that - Assessee explained that an amount of ₹ 11 lakhs was gifts from three persons. They could not be produced before AO for verification. The sources of gifts can be examined by AO by giving opportunity to assessee to produce the persons before AO or adducing evidence which can be verified/got verified by AO. Therefore, verification of source for gifts of ₹ 11 Lakhs is restored to the file of AO for fresh examination.

Summary

Issues involved:
Appeal against addition of unexplained investments, confirmation of addition by Appellate Commissioner, validity of explanations provided by the assessee, treatment of cash credits in the bank account, consideration of past savings and agricultural income, acceptance of gifts as sources of income, verification of sources of gifts, and the decision of the tribunal.

Analysis:

Issue 1: Addition of unexplained investments
The Assessing Officer (AO) added an amount as unexplained investments by the assessee, which was challenged in the appeal. The Appellate Commissioner confirmed the addition, leading to the appeal before the tribunal. The assessee provided various explanations for the sources of the funds, including past savings, agricultural income, sale of land, and gifts received. However, the Appellate Commissioner dismissed these contentions based on the lack of concrete evidence linking the sources to the cash deposits in the bank account. The tribunal analyzed the explanations and the cash credits in the bank account, ultimately directing the AO to accept the explanations related to agricultural income and sale proceeds, as they were verifiable from previous returns.

Issue 2: Treatment of cash credits and past savings
The tribunal scrutinized the dates and amounts of cash credits in the bank account provided by the assessee. Despite explanations regarding past savings and agricultural income, the tribunal found a gap between the sale proceeds and the cash deposits, questioning the nexus between the sources and the deposits. The tribunal highlighted the lack of evidence supporting the accumulation of savings over the years and the discrepancy in the gifts received and deposited amounts. The tribunal also noted the vague claims made by the assessee without substantial evidence to support the sources of the cash credits.

Issue 3: Acceptance of gifts as sources of income
The assessee claimed gifts totaling &8377; 11 lakhs from three individuals as a source of income. While confirmations were produced, the tribunal observed a gap between the dates of gifts and the deposits in the bank account. The tribunal acknowledged the need for verification of the sources of gifts and directed the AO to examine the matter further, providing the assessee with an opportunity to produce evidence or witnesses for verification. The tribunal set aside the previous decisions regarding the gifts and restored the issue to the AO for fresh examination.

In conclusion, the tribunal partially allowed the appeal, directing the AO to accept the explanations related to agricultural income and sale proceeds while ordering further verification of the sources of gifts. The tribunal emphasized the importance of concrete evidence to substantiate the sources of income and cash deposits, ensuring a thorough examination of all aspects before making additions to the assessee's income.