2023 (2) TMI 54 - AT - Income Tax

Addition u/s 68 - Addition of agricultural income as unexplained cash credit - main grievance of the lower authorities in the instant case is that the agricultural income is earned by the assessee in the distant location at Beed whereas the cash deposits were made by the assessee in a bank account maintained at Dadar - HELD THAT - It is not in dispute that assessee had furnished entire cash book containing the cash inflows from various sources and cash outflows. Hence, what is to be seen is availability of positive cash balance with the assessee on each date of making cash deposits. In the instant case, the same has been duly complied with by the assessee as she is having sufficient cash balances in her books to make cash deposits in the bank account. It is not the case of the Revenue that the agricultural income earned by the assessee together with dairy receipts in cash were used by the assessee for some other expenses and the same is not available with her as cash source. Once the nature and source of cash deposits made in the bank account had been duly explained by the assessee with cogent evidences, there cannot be any addition u/s.68 of the Act as unexplained cash credit - no hesitation to direct the ld. AO to delete addition made - Decided in favour of assessee. Addition on account of gift received by the assessee from HUF by treating the same as undisclosed income - HELD THAT - It is not in dispute that money has been received by the assessee from HUF as gift. In any case, the same would be exempt u/s.10(2) of the Act in the hands of the assessee individual as admittedly the said amount has been received by the assessee out of the current year s income of the HUF, which fact is evidenced from the financial statements of HUF and scrutiny assessment order of HUF u/s.143(3) of the Act for A.Y.2012-13. No hesitation in directing the ld. AO to delete the addition made towards gift received from HUF. Accordingly, the ground No.2 raised by the assessee is allowed.

Issues:
1. Addition of agricultural income as unexplained cash credit.
2. Addition of gift received from HUF as undisclosed income.
3. Carry forward of depreciation and business loss.
4. General issue not requiring specific adjudication.

Issue 1: Addition of Agricultural Income as Unexplained Cash Credit

The appeal challenged the addition of Rs.25,00,000 of agricultural income as unexplained cash credit. The assessee explained that the cash deposits were made from agricultural income earned during the assessment year. The authorities questioned the distance between the location of income generation and cash deposits. However, it was clarified that the cash was handed over to family members in Mumbai for depositing, as per general practice. The genuineness of agricultural income was accepted by the assessing officer and the Commissioner of Income Tax (Appeals). The tribunal found that the cash deposits were adequately explained with supporting evidence, including cash flow statements and reconciliation of receipts. As the source of cash deposits was justified, the addition under section 68 of the Income Tax Act was deemed unwarranted. Therefore, the tribunal directed the assessing officer to delete the addition of Rs.25,00,000 towards cash deposits.

Issue 2: Addition of Gift Received from HUF as Undisclosed Income

The appeal contested the addition of Rs.6,00,000 received as a gift from the HUF, treated as undisclosed income. The assessee provided confirmations and documents proving the gift from Gopinath Munde HUF. The assessing officer added the amount as unexplained cash credit under section 68 of the IT Act. However, the tribunal noted that the gift was received from the HUF out of its current year's income, as evidenced by financial statements and assessment orders. Citing relevant tribunal decisions, it was established that gifts from HUF to an individual fall within the exemption under section 56(2)(vii) of the Act. Consequently, the tribunal directed the assessing officer to delete the addition of Rs.6,00,000 towards the gift received from HUF.

Issue 3: Carry Forward of Depreciation and Business Loss

The third issue pertained to the carry forward of depreciation and business loss, which was considered consequential based on the decisions made in the first two issues. As those issues were resolved in favor of the assessee, the carry forward of depreciation and business loss would also be consequential in nature.

Issue 4: General Issue

The fourth issue raised by the assessee was of a general nature and did not require specific adjudication. The tribunal did not provide further details on this issue in the judgment.

In conclusion, the appellate tribunal ruled in favor of the assessee, allowing the appeal and directing the assessing officer to delete the additions made towards agricultural income and gift received from HUF. The carry forward of depreciation and business loss was considered consequential based on the decisions made in the first two issues.

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