2023 (11) TMI 1096 - AT - Income Tax

Addition u/s 68 or 56 - unexplained cash deposits - a dvance money received from Late buyer of property against the sale of property and subsequently returned - CIT(A) deletes the additions so made by the AO u/s 68 and has again brought the amount to tax under section 56(1) for non-availability of information on face of the balance sheet - HELD THAT - We couldn t find any show-cause issued on record or information sought from the assessee in this regard which has again prejudiced the case of the assessee by denying an opportunity before any adverse view is taken against her. In our analysis of the explanation so submitted by the assessee and material available on record in terms of entries in the cash book dated 23.12.2011, the agreement to sell dated 23.12.2011 which talks about earnest money out of total sale consideration of Rs 4.60 Cr, and the receipt issued by the assessee acknowledging receipt of Rs 30,00,000/- in presence of witness, thus we find that the assessee has reasonably explained the nature and source of cash deposit of Rs 30 lacs, being the advance towards the sale of the property owned by her. The property ownership and the agreement to sell has not been doubted by the Revenue. Mere non-appearance of the buyer who has since expired couldn t be held against the assessee. Assessee has also explained the refund of the said amount to the buyer due to non-materialization of the sale transaction and subsequently getting a better deal at a higher sale consideration with another buyer vide registered agreement for a total consideration of Rs 4.80 Cr and out of which, an amount of Rs 30 lacs was refunded to the original buyer. The breakup of total consideration of Rs 4.80 Cr has been duly given in the registered sale deed dated 22.05.2012 and has been duly recorded in the books of accounts. AR has stated at the Bar that the sale consideration of Rs 4.80 Cr has been duly offered to tax in the subsequent assessment year. It is also not the case of the Revenue that there is any on-money received by the assessee over and above the declared sale consideration of Rs 4.80 Cr which also forms the basis for paying the stamp duty. In our overall analysis, we find that there is no basis for making the addition either under section 68 or under section 56(1) of the Act and the same is hereby directed to be deleted. Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act.
2. Justification for taxing the amount under Section 56(1) of the Income Tax Act.

Summary:

Issue 1: Legitimacy of the addition of Rs. 30,00,000/- under Section 68 of the Income Tax Act

The case was reopened due to cash deposits in the assessee's HSBC Bank account. The assessee declared a total income of Rs. 4,68,770/-. The AO made an addition of Rs. 30,00,000/- under Section 68 as unexplained cash deposits. The assessee explained that the amount was an advance from late Smt. Mohinder Kaur for the sale of an industrial plot, which was later refunded. The Ld. CIT(A) accepted the additional evidence but still upheld the AO's addition under Section 68.

The Tribunal found contradictions in the CIT(A)'s findings, noting that the CIT(A) first confirmed the AO's addition under Section 68 but then deleted it, only to tax it under Section 56(1). The Tribunal held that the assessee had reasonably explained the source of the cash deposit, supported by the agreement to sell and the cash book entries. The Tribunal concluded that the addition of Rs. 30,00,000/- under Section 68 was unwarranted.

Issue 2: Justification for taxing the amount under Section 56(1) of the Income Tax Act

The CIT(A) taxed the amount under Section 56(1) due to the non-availability of a breakup of the advance shown in the balance sheet. The Tribunal noted that no show-cause notice or information was sought from the assessee regarding this issue, thereby prejudicing the assessee's case. The Tribunal found that the assessee had adequately explained the nature and source of the cash deposit and the subsequent refund due to a better deal. The Tribunal also noted that the sale consideration was duly recorded and taxed in the subsequent assessment year.

Conclusion:

The Tribunal directed the deletion of the addition of Rs. 30,00,000/- under both Section 68 and Section 56(1) of the Income Tax Act, allowing the appeal of the assessee.