2024 (7) TMI 1431 - AT - Income Tax

Unexplained credits in the books of account - AO and the CIT(A) have frivolously alleged that the amount received by the assessee does not pertain to be sale consideration - HELD THAT - In the present case, although it was not the responsibility of the assessee to prove the sources of such funds even then the assessee has filed the bank statement of the buyer starting from 01.04.2015 to 31.03.2016, and the said bank statement clearly reflects that the buyer was a man of means and having regularly deposits in crores were being received by the said buyer in the earlier years also, and therefore it cannot be alleged that the buyer has no funds. Meaning thereby that the assessee has duly furnished evidence to prove the identity and creditworthiness of the buyer and the genuineness of the transaction, and even then, if the Ld. AO or department has any apprehension in respect of the same, then they are free to open the case of the buyer. Thus, we hold that the requirement of law is not to prove the source of source of cash credit. Accordingly, we hold that the alleged credit stands explained and as such, the addition is deleted. Assessee appeal allowed.

Issues Involved:

1. Addition of Rs. 1,58,00,000/- as unexplained credits in the books of account.
2. Genuineness of the sale transaction of agricultural land.
3. Creditworthiness of the buyer, Shri Kesar Singh.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 1,58,00,000/- as Unexplained Credits:

The assessee filed a return declaring an income of Rs. 38,53,250/-. During the assessment proceedings, the AO computed the income at Rs. 1,96,53,250/- by adding Rs. 1,58,00,000/- as unexplained credits. The AO was not satisfied with the explanation and material provided by the assessee regarding the sale of agricultural land. The CIT(A) confirmed this addition, stating that the appellant failed to substantiate the claim of exempt agricultural income and prove the creditworthiness of the buyer, Shri Kesar Singh.

2. Genuineness of the Sale Transaction of Agricultural Land:

The assessee argued that the amount of Rs. 1,58,00,000/- was received from the sale of agricultural land to Shri Kesar Singh. The sale deed was registered, and the cheques initially given by the buyer bounced due to insufficient funds. After prolonged negotiations, fresh cheques were received and encashed in the relevant assessment year. The assessee emphasized that the sale deed was genuine and executed in front of the appropriate authority, with photographs of both the buyer and seller. The department, however, alleged that the amount received was an afterthought and represented the assessee's own money introduced in the guise of sale consideration.

3. Creditworthiness of the Buyer, Shri Kesar Singh:

The AO and CIT(A) questioned the creditworthiness of Shri Kesar Singh, noting inconsistencies in the bank account and the sudden cash deposits followed by immediate transfers to the assessee's account. The assessee provided the buyer's bank statements, showing regular deposits in crores, to prove that the buyer was a man of means. The assessee argued that it was not their responsibility to prove the source of the buyer's funds, as the transaction was a sale of land, not a loan or deposit.

Judgment:

The tribunal found that the sale deed was genuine and supported by the registered document. The department failed to prove any other consideration received by the assessee apart from the sale consideration. The tribunal held that the amount received by the assessee was not unexplained credits but the sale consideration for the land. The assessee was not required to prove the source of the buyer's funds. The tribunal concluded that the addition of Rs. 1,58,00,000/- as unexplained credits was unwarranted and deleted the addition. The appeal filed by the assessee was allowed.

Order:

The appeal filed by the assessee is allowed, and the addition of Rs. 1,58,00,000/- is deleted. The order was pronounced in the open court on 26.07.2024.

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