2024 (11) TMI 148 - AT - Income Tax

Unexplained money u/s 69A - cash deposits during the demonetization period - HELD THAT - It is an admitted fact that the assessee has withdrawn Rs. 1,20,000/- on 22.07.2016 and Rs. 13,80,000/- on 28.07.2016 from the bank account - AR demonstrated the withdrawals by filing the bank statements. On perusal of the bank statements, it is noticed that the assessee has withdrawn cash after redeeming mutual fund investments. However, we are not able to accept the cash balances available with the assessee on the date of deposits arising out of the rental income or any other past savings in the absence of any documentary evidences provided for the same, even before us. Further we also notice from the Income Tax Returns submitted by the assessee, rental income is being adjusted against the interest payment on the housing loans. We are therefore of the considered view that assessee has properly explained the sources of cash with respect to the withdrawals made by the assessee during July 2016 aggregating to Rs. 15,00,000/- and hence we consider amount of Rs. 15,00,000/- as properly explained by the assessee. We therefore direct the AO to allow amount of Rs. 15,00,000/- as properly explained by the assessee. TDS u/s 194IA in the case of joint co-owners for the property - Treating the assessee as assessee in default - submissions made before revenue authorities stating that there are three joint owners as evidenced by the sale deed - HELD THAT - As reading section 194-IA we noticed that transferee responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property is subject to deduct TDS @1% at the time of credit of such sum to the account of the transferor. In the instant case, it is evidenced by the sale deed submitted before us that there are three transferors holding equal shares in the property. Accordingly, the sale consideration of Rs.99 Lakhs is being shared by the three transferors at Rs. 33 Lakhs each. The revenue is not in dispute with respect to consideration of Rs. 99 lakhs. Since there are three joint co-owners the provisions of section 194-IA shall not be apply where the consideration for each co-owner is below the specified limit of Rs. 50 Lakhs and hence demand raised by the revenue becomes unsustainable. We are therefore allowing the grounds of appeal raised by the assessee.

Summary

Issues Involved:

1. Whether the cash deposits during the demonetization period amounting to Rs. 17,86,000/- were properly explained by the assessee under Section 69A of the Income Tax Act, 1961.
2. Whether the assessee was liable to deduct Tax at Source (TDS) under Section 194-IA of the Income Tax Act, 1961, for the purchase of an immovable property from joint co-owners.

Issue-wise Detailed Analysis:

1. Unexplained Cash Deposits During Demonetization (A.Y. 2017-18):

The primary issue in ITA No. 244/VIZ/2023 for the assessment year 2017-18 was whether the cash deposits totaling Rs. 17,86,000/- made by the assessee during the demonetization period were adequately explained. The assessee had claimed that these deposits were sourced from prior cash withdrawals, rental income, and other savings. The Assessing Officer (AO) initially treated these deposits as unexplained money under Section 69A of the Income Tax Act, due to insufficient documentary evidence provided by the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting the lack of documentary evidence.

Upon appeal, the Appellate Tribunal acknowledged that the assessee demonstrated cash withdrawals amounting to Rs. 15,00,000/- through bank statements. However, the Tribunal found no satisfactory evidence for the remaining Rs. 2,86,000/-, which was purportedly from rental income and past savings. Consequently, the Tribunal directed the AO to consider Rs. 15,00,000/- as properly explained, partly allowing the appeal.

2. TDS Deduction on Property Purchase from Joint Co-owners (A.Y. 2015-16):

In ITA No. 268/VIZ/2023 for the assessment year 2015-16, the issue revolved around the applicability of TDS under Section 194-IA for a property purchase involving joint co-owners. The assessee had purchased a property for Rs. 99,00,000/- from three joint co-owners, with each receiving Rs. 33,00,000/-. The AO treated the assessee as "assessee in default" for failing to deduct TDS, raising a demand of Rs. 1,79,340/-.

The assessee contended that since the consideration paid to each co-owner was below Rs. 50,00,000/-, the provisions of Section 194-IA did not apply. The Tribunal agreed with the assessee, interpreting that the section applies to individual transferors, and since each co-owner received less than Rs. 50,00,000/-, the TDS provision was not applicable. Thus, the Tribunal allowed the appeal, annulling the demand raised by the revenue authorities.

Conclusion:

The appeals were adjudicated as follows: ITA No. 244/VIZ/2023 (A.Y. 2017-18) was partly allowed, with Rs. 15,00,000/- of the cash deposits considered explained. ITA No. 268/VIZ/2023 (A.Y. 2015-16) was allowed, with no TDS liability for the property purchase from joint co-owners. The Tribunal's decisions were pronounced in the open court on 25th September, 2024.