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Facts
The assessee filed an appeal against the CIT(A)'s order upholding additions made by the AO for cash deposits in the bank account. The AO rejected the assessee's explanation that the deposits were from advances for plot sale and from purchasers, treating them as unexplained cash credits under Section 68 of the Income Tax Act.
Held
The Tribunal found that the CIT(A)'s rejection of the Rs. 25 lacs advance from Shri Prahlad Singh was based on surmises and the subsequent admission was not adequately dislodged. Regarding the Rs. 45.43 lacs from plot purchasers, the Tribunal noted that the assessee's business of property dealing was accepted by the Revenue. The Tribunal held that the rejection of the entire amount was not justified.
Key Issues
Whether the cash deposits in the assessee's bank account, sourced from alleged advances for land sale and payments from plot purchasers, constitute unexplained income under Section 68 of the Income Tax Act.
Sections Cited
68, 250
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Income Tax Appellate Tribunal, DELHI BENCHES “F”, NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SMT. ANNAPURNA GUPTA
1. The present appeal has been filed by the assessee against the order passed by the Learned Commissioner of Income Tax (Appeals), Rohtak [in short referred to as ‘CIT(A)’],under Section 250 of the Income Tax Act, 1961,(hereinafter referred to as “ the Act”) dated 30.11.2018.
The grounds of appeal raised by the assesse read as under:
“1. That the learned Commissioner of Income Tax (Appeals) Rohtak has erred Re both in law and on facts in upholding the addition of Rs. 25,00,000/- representing cash deposits in Rawat vs.ITO] A.Y. 2013-14- 2 – Bank and held to be alleged unexplained credit u/s 68 of the Act. 1.1 That the learned Commissioner of Income Tax (Appeals) has proceeded to uphold the addition by failing to appreciate that deposits in the bank stood duly explained out of the advance received from one Shri Prahlad Singh who had duly confirmed the advance by appearing in person and as such the addition confirmed is legally unsustainable. 1.2 That the learned Commissioner of Income Tax (Appeals) has overlooked relevant evidence placed on record and, drawn factually incorrect and legally unsustainable inferences based on irrelevant and extraneous consideration and thus, addition sustained is wholly unwarranted and not in accordance with law.
2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding an addition of Rs. 45,43,000/- out of Rs. 57,13,000/- representing sums received by the assessee in course of business of property dealing and, held to be unexplained cash credit u/s 68 of the Act. 2.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that assessee has led evidence so as to discharge the onus under section 68 of the Act and therefore, the addition sustained on subjective and arbitrary assumptions is contrary to law and hence untenable. 2.2 That finding of the learned Commissioner of Income Tax (appeals) that "no proper evidence has been furnished in respect of the remaining amount of Rs. 45,43,000/- and is not substantiated with the help of conveyance deeds, bank accounts as the dates of deposit, withdrawals and sale are not matching and the assessee's name is not there in the conveyance deeds" is not based on correct appreciation of facts and evidence on record and therefore untenable. 2.2 That while sustaining/making various adverse findings and conclusions recorded by the authorities below are factually incorrect and contrary to record, legally misconceived and untenable.”
As transpires from the orders of the authorities below, addition was made to the income to the assessee on account of cash found deposited in his bank account source of which Rawat vs.ITO] A.Y. 2013-14- 3 – remained unexplained, to the tune of Rs.82,13,000/-. The AO rejected the assessee’s explanation of the source of cash deposits being attributable to advances received on account of sale of plot amounting to Rs.25 Lacs and amounts received from various persons for purchase of plot amounting to Rs.57,13,000/-. The assessee’s explanation primarily was based on his submission that he was carrying out the business of property dealing and had received advances and amounts from various customers in the course of his business which was deposited in cash in his bank account, which in turn, was disbelieved by the AO for the reason stated in his order and addition made to the income of the assessee of Rs.82,13,000/- as noted above by us u/s.68 of the act.
The Ld. CIT(A) gave partial relief to the assessee partly accepting assesses explanation of cash deposit attributable to amounts received from purchasers of plot to the extent of Rs.11,70,000/- out of addition of Rs.57,13,000/- made by the AO.The balance addition was confirmed by the Ld.CIT(A). Aggrieved by the same, the assessee is in appeal before us.
5. Perusal of the order of the Ld. CIT(A) reveals that vis-à-vis the assessee’s explanation of Rs.25 Lacs having been received as advance for sale of plot from one Shri Prahlad Singh, the explanation was rejected by the Ld. CIT(A) noting that Shri Prahlad Singh had given contradictory statements in this regard, having denied giving any advance to the assessee initially when his statement was recorded by the AO on 21.03.2016, but subsequently during remand proceedings he accepted having paid the impugned amount to the assessee. Further, in the absence of Rawat vs.ITO] A.Y. 2013-14- 4 – any written agreement for the transaction of land, to which, the advance pertained and noting that entire transaction was carried out in cash and not through banking channel, the Ld. CIT(A) held the explanation of the assessee to be not plausible and accordingly confirmed the addition made by the AO of Rs.25 Lacs. The findings of the Ld. CIT(A) in this regard is at paragraph 5.1 of his order as under:
“5.1 Advance of Rs 25 lacs received against agreement from Sh. Prahalad Singh - As per the remand report, the AO has examined Sh. Prahalad Singh on oath and submitted a detailed report in which he has referred to the documentary evidence and statements where earlier statement of Sh. Prahalad Singh dated 21.03.2016 was negative and he clearly denied having given any advance to the assessee and the current statement during the remand proceedings which affirms that he had made an advance of Rs 25 lacs. He has relied on the documents of sale of property of Sh. Prahalad Singh out of which the advance was made to the assessee, his statement in this respect and the medical certificate to show his poor hearing condition. The AO asked him to submit copy of agreement made between Shri RotashRawat and Sh. Prahlad Singh S/o Narayan for purchase of plot vide this office letter F.No. ITO/W-2/NNL/2018- 19/870 dated 10.09.2018. On the fixed date neither anyone attended the remand proceedings nor any written reply was received. On 28.09.2018, the AR of the assessee submitted that the agreement for purchase of land was made in actual but due to conflict in sharing of the land, the sale deed was not executed and therefore agreement made was torn out and in present the same is not available with him and this fact was duly disclosed before the assessing officer during the assessment proceedings as well as in remand proceedings. There is no copy of mentioned agreement available with the assessee. It cannot ascertained without the document was got registered or not, as the agreement was not produced before the AO. It is seen that in this case the entire transaction is in cash i.e. the money has been taken from Prahalad Singh in cash and repaid in cash. Further, it is also seen that there is no documentary evidence to substantiate the same. On the basis of statement of creditor. creditworthiness of creditor and other circumstantial evidence, even cash transactions are considered genuine in several cases as the persons involved are agriculturists, but in the instant case there are two contradictory statements of the creditor. In one statement he has categorically denied having given any money to the assessee and in the second statement he has confirmed having paid Rs 25 lacs as advance to the assessee. The reason for this denial has been given as hearing disability of the creditor. The report shows that the creditor is Rawat vs.ITO] A.Y. 2013-14- 5 – partially disabled and the report is of 2018 while the statement was recorded originally in 2014 when it is likely that this disability would be there but would be much less acute. A perusal of the statement dated 22.03.2014 shows that this transaction was not denied by Sh. Prahalad Singh due to wrong understanding/listening because seven questions were asked and he hasgiven specific reply regarding his personal details, agricultural land, purchase and sale of property and he has stated twice that he has not done any land deal except an agricultural land sold and purchase of agricultural land thereafter. He has further stated that he has not done any agreement with Mr. RohtasRawat and denied that advance of Rs 25 lacs has been paid to him. In view of the AO's remand report and facts of the case (where there are two contradictory statements), in the absence of a written agreement and the fact that the transaction was not made through banking channel, the assessee fails to substantiate his claim that advance of Rs 25 lacs was received from Sh. Prahalad Singh. In view of the above discussion, this ground of appeal is dismissed.”
6. With respect to the source of cash deposit attributed to amount received from various purchasers of land which the Ld. CIT(A) had confirmed to the tune of Rs.45,43,000/-,the assessee had attributed cash deposits in his bank account amounting to Rs.63,43,000/- as being received from such purchasers who were 26 persons in number.Since 4 persons were produced before the AO who had stated to have given an amount of Rs.6,30,000/- for purchase of land to the assessee, the AO accepted cash to have been received from these persons and for the remaining amount of Rs.57,30,000/ in the absence of any substantiation of the assessee’s explanation, he held the same as unexplained credits and added to the income of the assessee.
7. Before the Ld. CIT(A) in the remand proceedings, the assessee produced 5 more persons who confirmed to have purchased plots from the assessee and paid cash for the same amounting to Rs.11,70,000/-. Accordingly, out of the addition made by the AO of Rs.57,30,000/-, the Ld. CIT(A) gave a relief
“5.2 Receipt of Rs. 63,43,000/- from various persons for purchase of plot - The AO had given relief of Rs. 6,30,000/- during assessment proceedings as assessee could produce only four persons out of twenty six persons who confirmed that they had given this money to the assessee to purchase property through him. The AO held that this was not a business transaction and accepted Rs 6,30,000/- as an advance made to the assessee. As regards the remaining amount of Rs. 57,30,000/-the AO held that it is assessee's income from unexplained sources. This finding was based on the facts such as assessee had not disclosed any income from business or property dealing in his return of income in earlier years, current year or later years; these bank accounts in which cash deposits were made were not declared by the assessee himself and to support his story of money belonging to other persons he submitted 30 conveyance deeds but neither cash deposit dates nor withdrawal dates match with the conveyance deeds; the assessee's name does not figure in the conveyance deeds; the 26 persons whose names figured in the conveyance deeds were agriculturists, with no PAN and no transaction was through banking channels; the creditworthiness of these persons and genuineness of the transactions could not be established; only four persons were produced and these two failed to explain the source of investment. During the remand proceedings the assessee could produce five more persons who confirmed that they had purchased a plot through the assessee and paid the entire amount to him in cash and also paid a commission to him. As per the remand report,the AO is of the view that assessee was involved in the business of property dealing as all sale deeds have been made in the name of purchasers who were agriculturists and from rural areas. Thus, the transaction of Rs. 11,70,000/- was found to be correct. As regards the remaining amount of Rs 45,43,000/- the assessee failed to produce the remaining 17 persons for statement/enquiry and no supporting documents could be furnished in this respect. In view of the facts of the case and above discussion it is held that inspite of several opportunities during the assessment proceedings and again during the remand proceedings, after the request was made by the assessee u/r 46A of IT rules, the assessee could produce only five more persons from whom Rs 11,70,000/- was received by the assessee. As rightly mentioned in the remand report and in the assessment order, no proper evidence has been furnished in respect of the remaining amount of Rs 45,43,000/-. That Rawat vs.ITO] A.Y. 2013-14- 7 – seventeen persons had paid this amount of Rs 45,43,000/-, as claimed by the assessee, is not substantiated with the help of conveyance deeds, bank accounts as the dates of deposit, withdrawals and sale are not matching and the assessee's name is not there in the conveyance deeds. The assessee had ample time to produce the 17 persons during the remand proceedings and substantiate his claim. I agree with the finding of AO that the assessee has failed to establish his claim and could not substantiate the source of Rs 45,43,000/-credited in his bank account. Thus this addition is confirmed and Rs 45,43,000/- is held to be assessee's income from undisclosed sources u/s 68 of the Act as he has failed to establish the genuineness of the transactions and creditworthiness of the creditors. The following decisions support my finding that as the assessee failed to establish the genuineness of transactions and creditworthiness of creditors and his plea cannot be accepted- 1.
Toby Consultants (P.) Ltd. Vs CIT [2010] 324 ITR 338 (Delhi) where Hon'ble Delhi High Court held that where assessee-company had shown in books unsecured loans of Rs. 2,68 crores and Rs. 2.45 crores from its two directors and it was explained that money belonged to its own entity and was routed through directors and Tribunal found that directors who advanced loan were admittedly not at all men of means for advancing such huge amount of loan amounting to about Rs. 5 crores and secondly that assessee even for taking such huge amount of loan did not want to pay any interest for which creditors also agreed, Tribunal had rightly, arrived at a finding of fact, on analysis of all relevant material onrecord, that genuineness of transaction had not been established and assessee had failed to independently prove share application money, amount so received was liable to be taxed under section 68.
2. Sanraj Engineering Pvt. Ltd. Vs CIT (ITA 79/2016) (Delhi) where Hon'ble Delhi High Court held that addition made u/s 68 on account of unsecured loans was justified, where initial onus of proving the creditworthiness of the lenders was not discharged by the assessee.
3. Naresh Chandra Jain Vs CIT (ITA No.335 of 2009) (Allahabad) Where Hon'ble Allahabad High Court held that tribunal was justified in holding that amount of loan received by assessee was unexplained income u/s 68 in as much as identity. genuineness, creditworthiness of the transaction is not proved.
4. Kavita Chandra vs CIT(P&H High Court, 2017 PIOL- 611-HC-P&H-IT) where it was held that cash deposits Rawat vs.ITO] A.Y. 2013-14- 8 – can be treated as unexplained income if the assessee was unable to link cash withdrawn from the bank with the cash deposits.
CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) where Hon'ble Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. In view of the above discussion, this ground of appeal
is partly allowed.”
8. All the grounds raised by the assessee before us pertain to the aforesaid two additions confirmed by the Ld. CIT(A) u/s.68 of the Act in the hands of the assessee.
9. Having heard the contentions of both the parties, we have noted that the explanation of cash amounting to Rs.25 lacs having been sourced from advance given by one Shri Prahlad Singh to the assessee for purchase of land was rejected by the Ld. CIT(A) for the reason that Shri Prahlad Singh had given contradictory statements in this regard; that he initially denied paying any such advance to the assessee and subsequently confirmed the same. Added to it, was the fact noted by the Ld. CIT(A) that the purported land deal was not evidenced with any agreement and was apparently carried out entirely in cash. And based on this, he rejected the assessee’s explanation as not true or believable.
10. In our view, the findings of the Ld. CIT(A) are not entirely correct. It is not denied that the last statement recorded of Shri Prahlad Singh affirmed having paid cash as advance to the assessee for purchase of a plot. The entire basis for the Ld. CIT(A) for rejecting this statement of Shri Prahlad Singh was that Rawat vs.ITO] A.Y. 2013-14- 9 – he had earlier denied entering into any transaction of the assessee and paying advances to the tune of Rs.25 Lacs. Therefore, the premise of the Ld. CIT(A)for rejecting assessee’s explanation, we find it merely based on surmises and conjunctures not supported with any corroborative evidence to dislodge the subsequent admission of Shri Prahlad Singh.
11. Similarly, we have noted that the rejection of the assessee’s explanation of having received cash from purchasers of plot amounting to Rs.45,30,000/- was rejected since the parties from whom this amount was received could not be produced before the AO for confirmation.
12. It is an admitted fact that out of the 26 parties to whom the assessee had attributed cash to the tune of Rs.63,43,000/- as received on account of purchase of plot by them from the assessee, a total of 9 had appeared before the Revenue authorities; 4 before the AO during assessment proceedings and 5 in remand proceedings before the AOduring appellate proceeding before the Ld. CIT(A). Therefore, it is an established and accepted fact by the Revenue authorities that the assessee was indulging in the business of property dealing. Considering the entire facts and circumstances, therefore, we find that the rejection of assessee’s explanation for the remaining cash of Rs.45 Lacs merely for the reason that the remaining parties could not be produced, is not entirely justified.
13. In the light of the entire facts and circumstances of the case as discussed above, it is evident that both the Revenue and the Rawat vs.ITO] A.Y. 2013-14- 10 – assessee have been unable to justify and cement their respective stands with corroborative evidences. And considering that the Revenue accepts the fact of the assessee carrying out property dealing activity in the impugned year, the confirmation of entire addition of Rs.25Lacs explained by the assessee as cash sourced from advances received in his business and Rs. 45 lacs as cash sourced from sale of property in the course of business, we hold, is not justified.To meet the ends of justice, therefore, we hold that a total of 1/3rd of the cash attributable to the both sources i.e 1/3rd of Rs. 70,43,700/- (Rs.25lacs + Rs.45,43,700/-) amounting to Rs.23,47,800/- be treated as from explained sources while the balance 2/3rd, amounting to Rs.46,95,900/-,be treated as from unexplained sources and the addition be sustained.
14. The grounds raised by the assessee challenging the additions on merits are, thus, partly allowed.
In the result, the appeal of the assessee is partly allowed in above terms.
This Order pronounced on14/05/2025