2019 (7) TMI 381 - AT - Income Tax

Addition u/s 69A - unexplained money - sum received on sale of land co-owned - sale through conveyance deed - year of assessment - reason for holding the cheque and not deposited the same for a long period of time - Subsequent to the execution of the conveyance deed, the buyer asked the assessee not to deposit the cheque till he gives the clearance - HELD THAT - No positive material was brought on record by the AO to decline the explanation of the assessee with regard to receipt of cash during the year in respect of the cheque which could not be deposited in the bank account in the A.Y.2011-12. Therefore, the action of the AO to bring the amount of ₹ 60,00,000/- to tax which was already offered by the assessee in the A.Y.2011-12 is bad in law. The observation of CIT(A) to the effect that the amount received by the assessee in the A.Y. 2013-14 and the sale of the said land in the A.Y. 2011-12 are separate transactions is incorrect since the amount recoverable from the Purchaser is not only shown in the audited accounts of the assessee but also can be clearly seen from the bank statements of the assessee which corroborate the fact that the said amount of ₹ 60,00,000/- was never received by the assessee in the A.Y. 2011-12. Therefore, the amount received by the assessee during the A.Y. 2013-14 is nothing but the consideration received as part of the said transaction of sale of land and the stand taken by the A.O. and upheld by the CIT(A) is erroneous on the facts and in the circumstances of the case. CIT(A) has also erred in observing that the assessee did not advance any reason as to why the cheque of ₹ 60,00,000/-received from the Purchaser was not deposited in the bank. In fact the assessee has offered the explanation that the assessee along with other co-owner, Mr. Pratapsinh Shoorji Vallabhdas, were restrained by the Purchaser from depositing the cheques and were warned of the consequences such as cheques being dishonoured due to insufficiency of the balance in the bank account of purchaser M/s. Kanchi Concept Builders and Developers Pvt. Ltd. As a result, the assessee and Mr. Pratapsinh Shoorji Vallabhdas did not deposit the cheques in the bank account. At this backdrop it was factually incorrect on the part of the CIT(A) to conclude that the assessee did not offer any reason for holding the cheque and not deposited the same for a long period of time and such conclusion deserves to be quashed. No merit for the addition u/s.69A - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?60,00,000 to total income under section 69A of the IT Act.
2. Treatment of the ?60,00,000 addition under the head business income.
3. Failure to appreciate non-deposit of the cheque in the appellant's bank account.
4. Treatment of the ?60,00,000 as unexplained money.

Analysis:

Issue 1: Addition of ?60,00,000 under section 69A:
The appellant, an individual, filed a return for A.Y. 2013-14 declaring income of ?14,78,250. The Assessing Officer (AO) found a cash deposit of ?60,00,000 in the appellant's bank account and sought the source. The appellant explained receiving this amount from a land sale in A.Y. 2011-12, supported by a conveyance deed and cheque from the purchaser. The AO added the amount to income, alleging unexplained receipt. The CIT(A) upheld this, leading to the appeal.

Issue 2: Treatment of addition under business income:
The appellant argued that the ?60,00,000 was not received in A.Y. 2011-12 as the cheque was not deposited due to the purchaser's instructions. The capital gains from the land sale were already declared and taxed in A.Y. 2011-12, with no outstanding liability. The appellant received the amount in cash in A.Y. 2013-14, supported by bank statements and balance sheets. The AO's action for double taxation was deemed incorrect.

Issue 3: Failure to appreciate non-deposit of cheque:
The appellant, along with another co-owner, refrained from depositing the cheque due to the purchaser's instructions to avoid potential dishonor. The CIT(A)'s conclusion that the appellant did not provide a reason for non-deposit was deemed factually incorrect, as the explanation was offered and supported by evidence.

Issue 4: Treatment of ?60,00,000 as unexplained money:
The AO's addition under section 69A was challenged, highlighting the proper disclosure and taxation of the capital gains in A.Y. 2011-12. The appellant's explanation, supported by documentation, demonstrated that the amount was part of the land sale transaction, not unexplained income. The Tribunal directed the AO to delete the addition.

In conclusion, the Tribunal allowed the appellant's appeal, emphasizing the incorrectness of the AO's action in adding the ?60,00,000 to income, as it was already disclosed and taxed in a previous assessment year. The Tribunal found no merit in treating the amount as unexplained income under section 69A and directed its deletion.