AVINASH NARAYAN SUTAR,NAVI MUMBAI vs. ITO 28(1)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI BASKARAN BR, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA Nos. 1029, 1030 & 1031/Mum/2020 (A.Ys: 2011-12, 2012-13 & 2010-11) Avinash Narayan Sutar Vs. ITO – 28(1)(2) Plot No. 582, Laxmi Tower No.6, Vashi Niwas, Sector -1, Station, Navi Mumbai- Shiravana, Nerul, Navi 400703. Mumbai – 400706. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ARSPS9036R Appellant .. Respondent ITA No. 1321/Mum/2020 (A.Y: 2011-12) ITO – 28(1)(2) Vs. Avinash Narayan Sutar Tower No.6, Vashi Plot No. 582, Laxmi Station, Navi Mumbai- Niwas, Sector -1, 400703. Shiravana, Nerul, Navi Mumbai – 400706. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ARSPS9036R Appellant .. Respondent

Assessee by : Shri Hariom Tulsiyan.AR Revenue by : Shri Manoj Sinha.DR Date of Hearing 21.09.2022 Date of Pronouncement 12.12.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM:

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The assessee has filed the three appeals against the separate orders passed by the Commissioner of Income Tax (Appeals)-26, Mumbai passed u/s 250 of the Act and the revenue has filed the cross appeal for the A.Y 2011-12.

Since the issues in these appeals are common and identical, hence are clubbed, heard and consolidated order is passed.

For the sake of convenience, we shall take up the ITA No.1031/Mum/2020 for the A.Y. 2010-11 as a lead case and the facts narrated. The assessee has raised the following grounds of appeal:

The present appeal is directed against order passed by the learned Commissioner of Income-tax, Appeals-26, Mumbai.

The learned Commissioner of Income-tax, Appeals erred in sustaining the action of assessing officer in determining total income of appellant at Rs.48,04,75 against returned income Rs.2,58,670.

The learned Commissioner of Income-tax, Appeals erred in sustaining the action of assessing officer, income @ 10% of cash deposit Rs.1,64,78,801 whereby, the assessing officer's action sustained addition of Rs.16,47,880.

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Your appellant craves leave to add, to alter or to withdraw any ground or grounds of appeal on or before the date of hearing. 2. The brief facts of the case are that the assessee is an individual and is engaged in the business as builders and developers of real estate. The assessee has filed the return of income for the A.Y 2010-11 on 12.05.2011 disclosing a total income of Rs.2,58,666/- .Subsequently the case was reopened u/s 147 of the Act after recording the reasons and notice u/s 148 of the Act was issued. In compliance to the notice, the assessee has filed a letter dated 26.04.2014 to treat the return of income filed on 12.05.2011 as the due compliance to notice u/s 148 of the Act. Subsequently the Assessing officer (AO) has issued notice u/s 143(2) and 142(1) of the Act along with questionnaire. In compliance to the notice, the Ld. AR of the assessee appeared from time to time and furnished the details and the case was discussed. On the perusal of the financial statements, the AO found that the assessee has received Rs.30 lakhs being non refundable deposit on account of Joint Venture Agreement(JVA) dated 29.01.2010 and this was not disclosed in the computation of income of the

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assessee. The AO found that the assessee has entered into agreement to develop a plot of land at Nerul with M/s.Creative Enterprises and the assessee has received Rs. 30 lakhs as non refundable deposit before the execution of the agreement which is also evident in the schedule of JVA. Since the entire amount was received in the F.Y 2009-10 and was not offered for taxation and the assessee was called for the explanations. In compliance, the assessee has filed a letter on 16.03.2015 explaining the nature of the transaction and has offered the said amount as income of the assessee.

4.2 During the assessment proceedings, the details/explanation of such cash deposits as well as the details as to how such cash deposits were included in the

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books of accounts of the assessee for the year. In response, the assessee, vide letter dated 16-03-2015 submitted that, "As your Assessee is in the business of buying plots and construction of Buildings. The nature of business is of such a kind that whenever a Builder or Developer buys a plot initially they have to give a token amount and prepare a MOU (Memorandum Of Undertaking) and its is between the Villagers and the buyer who is( Builder or Developer). The token amount is in cash and necessary terms and conditions are laid down in MOU. This is just a transaction that one party is showing his intention to purchase and other party is willing to sell the plot. This is being practice with all the builders and Developers in Navi Mumbai. As your assessee also come under this category. But with respect to your assessee has taken loan from various parties and has withdrawn cash to give token towards purchase of plot. If the deal is not done or not finalize then your Assessee will again deposit the cash in the bank account. The cash deposit transaction with all the bank are withdrawn earlier and afterward being re-deposited in same bank or other bank accounts. As your assessee has various bank Accounts and the same amount is been involved in all the bank accounts and no new cash is been deposited or been involved. I hereby state that cash book have been provided with necessary peak.

As per the above details taking into consideration that the amount of peak should be taken while computing or finalizing the case. Your honour shall realize that there has always been sufficient cash in the books of the assessee and the same has been re-deposited in the bank and the deficiency, if any, should only be taxed."

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…"As your Assessee is in the business of buying plots and construction of Buildings. As already submitted, the nature of business is of such a kind that whenever a Builder or Developer buys a plot initially they have to give a token amount and prepare a MOU (Memorandum Of Undertaking) and its is between the Villagers and the buyer who is( Builder or Developer). The token amount is in cash and necessary terms and conditions are laid

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down in MOU. In such a scenario, many times, the assessee had to send some of his friends/relatives/employees etc to withdraw cash on his behalf which was in reality, intended for the assessee. These persons were just helping the assessee to conduct his business out of friendship. The view expresses by your honour that the cash withdrawals made by the assessee through these persons can not be treated as the assessee's available cash in hand is not proper. Further, as per the requirement made by you, the names/addresses and other details of these persons can be obtained and furnished before your honour for verification. However, the details are very large and it is therefore requested that the assessee may be given a time of at least seven days to fulfill the said requirement. I am confident that after considering the details filed by in this respect, it shall become amply clear that the cash withdrawals were done by the assessee himself or the persons on his behalf.

Also, it is also apparent from the relevant bank statements that several times, the withdrawals were done by the assessee himself and such cash was invariably be treated as cash available in the books of accounts of the assessee. Therefore, if the contention of your honour is accepted, even then the entire cash book can not be wrong and a substantial part of the cash is sourced from the e withdrawals, made by the assessee as well as made by other persons on his behalf or is. M. D. VORA & CO Chartered Accountants

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employees and are not substantiated with corroborative evidence. The assessee has requested further time to submit the additional information called. Since the assessment was getting time barred and the AO has no other alternate to make the assessment. The AO finally observed from the bank statement that the assessee has made cash withdrawals and such withdrawals were made through friends and relatives, however the assessee has provided the revised cash book and identity of the persons making cash withdrawals being the friends, relatives and employees are not supported with evidence. The AO considering the facts of cash with drawls has observed at page 3 Para 4.5 of the order and finalized the assessment as under:

4.5 From the bank statements, it can be seen that the assessee has himself made some cash withdrawals as already discussed. Also, some of the persons may have been his friends/relatives who ran some errands for him such as cash withdrawals from bank etc to help his business. However, the assessee has been unable to provide the undersigned the revised cash book nor the dentities of the persons making cash withdrawals being his friends/relatives/employees has been Tovided. No other evidences have been furnished. In the absence of corroborative evidences, the aim of the assessee that the

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entire cash withdrawal from his bank account was his cash in hand which was used to sources the relevant cash deposits cannot be accepted in its entirety. Therefore, the peak cash deficiency as claimed by the assessee on the basis of the cash book for the year cannot be accepted as claimed At the same time, it cannot be denied that the assessee must have some cash in hand which could have been used for subsequent cash deposits in the bank. Therefore, in the opinion of the undersigned, it would not be fair and proper to treat the entire cash deposits in the bank account of the assessee as unexplained. However, in the absence of revised cash book as well as other evidences, it is hereby held that 35% of the cash deposits in the bank accounts of the assessee were not from explained sources. Total cash deposits in the bank accounts of the assessee during the year were to the tune of Rs. 1,64,78,801/- and 35% of the same comes to Rs. 52,67,580/- which is is hereby added to the total-income of the assessee as unaccounted cash deposits in the bank account being unexplained money u/s 69A of the Act. Penalty proceedings u/s 271(1)(c) is hereby initiated for concealment of income.

6.The AO has made the addition of undisclosed business receipts of Rs.30lakhs and unexplained cash money u/s 69A of the Act of Rs. 57,67,580/- and assessed the total income of Rs.89,24,450/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 27.03.2015.

7.Aggrieved by the order, the assessee has filed an appeal with the CIT(A), whereas the CIT(A) considered

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the grounds of appeal, findings of the scrutiny assessment and submissions of the assessee in the course of hearing proceedings. Further the assessee has filed the additional evidences in the appellate proceedings and the AO has furnished the remand report and the assessee also filed comments on the remand report. The CIT(A) considering the facts, submissions and remand report has observed at Page 3 Para 5 read as under:

During appellate proceedings, the assessee filed written submission, the relevant part from which is reproduced as under – Appellant has filed return of income for AY 2010-11 on 12.05.2011 declaring total income of Rs.2,58,666/-, assessed income Rs.89,24,450/-, addition was made of Rs.30,00,000/- on account of undisclosed income and Rs.57,67,580/- on account of unexplained money. Facts of the Case: Appellant is into a business of dealing with lands, entering into joint venture agreement for construction of flats. Ld. AO has not rejected the books of accounts and has accepted the financial statements. However, addition was made on account of cash deposit in bank. Ground No 1: Ld. AO has erred in making addition of Rs.57,67,580/- (35% ofRs. 1,64,78,801/-) being cash deposit in the bank accounts on account of unexplained source u/s 69A of the Act. Assessee maintains five bank accounts for the year under review. There were certain cash deposits of Rs. 1,63,35,933/- for

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the year under review however extract from the cash book was submitted vide letter dated 16/03/2014 where total payments/cash deposit in bank was shown Rs. 1,64,78,801/- which includes expenses & withdrawals of Rs.1,42,868/- (65,149 + 8,500+ 63,219 + 6,000), net deposit in bank is Rs. 1,63,35,933/-. Appellant's Submission: Regarding negative cash balance on 26.03.2010 Rs. 1,45,390/- and 29.03.2010 Rs. 7,94,890/- :-Ld. AO has not applied his mind infact there was a mistake by bank, entry of Rs.5,00,000/- cash deposit on 26.03.2010 was wrongly entered. This entry was reversed by bank on same day & the same can be seen from the bank statement. Infact appellant has deposited Rs. 10,00,000/- on 26.03.2010 when cash balance was Rs. 13,54,610/-. Regarding negative cash balance on 29.03.2010 of Rs.7,94,890/- as appears in the cash book considering entry-wise. Infact cash withdrawal of Rs. 10,00,000/- was made on the same day, considering above mentioned both entries, there was no negative balance. Therefore, contention of the AO regarding cash negative on two occasions is factually incorrect. Regarding cash withdrawal by employees & relatives of the appellant, total amount Rs. 70,00,500 (as per bank/person-wise chart) :- During the assessment proceedings, it was brought to the notice of the AO that few other persons have withdrawn cash on behalf of the appellant. Bank-wise details of cash withdrawals by persons is as follows: Saraswat Bank A/c. No. 5364 - It is the practice of the bank to write cash in the bank statement alongwith the name of the person who withdrew cash. Total cash withdrawals from bank is Rs.7,95,000/- (Mithun Shetty Rs.5,45,000/-, Mahendra Jain Rs.2,00,000/- and Virendra Yadav Rs.50,000).

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Therefore, there was sufficient cash balance with the appellant to deposit in the bank. □ Axis Bank A/c. No. 28583 - Total cash withdrawals by persons other than appellant is Rs. 4,09,000/-. Major cash withdrawals amounting to Rs.3,00,000/- by Mr. Mithun Shetty who has confirmed by an affidavit, that all the cash withdrawals were on behalf of the appellant & he has no bank account for the year under review. Copy of affidavit duly signed by Mithun Shetty is enclosed herewith. Therefore there is sufficient cash balance to deposit in the bank. □ Catholic Syrian Bank 19001 - Total cash withdrawals by persons other than appellant is Rs. 18,74,000/- The majority of cash amounting to Rs. 15,49,000/- has been withdrawn by Mr. Mithun Shetty and in view of his affidavit that he does not have a bank account for the year under review and that he has withdrawn cash for the appellant, other persons viz. Rs.1,25,000/- by Mr. Manoj & Rs.2,00,000/- by Mr. Ramkrishna Sutar has withdrew cash for the appellant himself. Therefore, there was sufficient cash balance with the appellant to deposit in the bank DMK Bank Ltd 1329- It is the practice of the bank to write cash in the bank statement alongwith the name of the person who withdrew cash. Total cash withdrawals from bank is Rs.32,50,000/- (Mithun Shetty Rs.17,30,000/-, Sarfaraj Khan Rs. 10,00,000/-, Nitin Patil Rs.2,00,000/-, Vivek Rs.2,00,000/-, Suresh Patil Rs.20,000/-, Govardhan Matre Rs.50,000/- and Naresh Sutar Rs. 50,000). Therefore, there was sufficient cash balance with the appellant to deposit in the bank. DMK Bank Ltd 110093- It is the practice of the bank to write cash in the bank statement alongwith the name of the person who withdrew cash. Total cash withdrawals from bank is Rs.6,72,500/- wherein all are cash withdrawals as per the bank marking system. (Bhushan Rs.2,00,000/-,

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Ramsakhlal Sahani Rs.1,00,000/- and Bhanupratap Rs.52,500/-). Therefore, there was sufficient cash balance with the appellant to deposit in the bank. Therefore, total cash deposit in bank is Rs.1,63,35,933/- was out of withdrawals made from banks. Addition on this account is not justifiable. We rely on Niteshkumar R.Dalwadi, Anand vs Department Of Income Tax ITAT B Bench Ahmedabad (ITA No.53/Ahd/2013) wherein the fact of the case are similar i.e. bearer cheques were given to persons to withdraw cash on behalf of the appellant and the same cash has been deposited in the bank account by the appellant. Similarly, the peak negative balance was added to the income in the case mentioned whereas in the appellant's case, there is no negative peak balance. Ld. AO has made addition w/s 69A of the IT Act. Section 69A clearly mentions:- "694. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money. bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." Therefore, section 69A can be invoked when there are monies which has not been recorded in the books of accounts but in the present case the appellant has recorded all the cash deposits and withdrawals in his books and the Ld. AO has nowhere rejected the books of accounts. In view of above, I request you to kindly delete the additions made.

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The appellant filed additional evidences such as affidavits of the persons to whom bearer cheques were given which were not submitted before the AO. Therefore, vide letter dated 14.09.2017, the AO was directed to examine the veracity of written submissions made by the assessee. For/e, t. D. VORA & Chortored Accountants 5.1 The AO furnished his report dated 13.04.2018, the crux of comments offered by the AO is as under- a) The AO has reiterated the facts of the case and findings of the AO as mentioned in the assessment order with regard to the additions made by the AO. b) In the affidavit dated 07.02.2017, Mr. Mithun Shetty declared that during the F.Y. 2009-10, the assessee had given him bearer cheques worth 41,24,000/- to withdraw cash from various banks. In the affidavit dated 14.02.2017, Mr. Mahendra Jain declared that the assessee had given him bearer cheques worth 4,00,000/- to withdraw cash from various banks. c) On the basis of the affidavits, summons u/s. 131 of the Act were issued to Shri Mithun Shetty and Shri Mahendra Jain and their statements were recorded on 17.01.2018. In the statements recorded both the persons have stated to be petty civil contractors not assessed to tax. Further, both of them do not have any business relation with the assessee and they have received no salary or anything for the work done for the assessee. d) On going through the copy of the affidavits, it is seen that they are dated 07.02.2017 and 14.02.2017 respectively. However, the assessee had failed to produce the said documents before the completion of assessment i.e. on or before 27.03.2015. It is clear that the assessee has willfully not submitted the said documents before the completion of assessment.

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e) On perusal of the statement recorded of the above two persons, it is seen that even though they are not associated in any manner with the assessee, they have done work allocated by the assessee. It is clear that both the above persons are concealing the true facts. 5.2 In view of the above, vide letter dated 26.09.2018, comments of the assessee were sought on the remand report submitted by the AO. In response, the assessee furnished a reply vide letter dated 12.02.2019 which is reproduced as under- Assessing Officer's request not to admit additional evidence Under Rule 46A of Income tax Rule, since appellant has given various opportunities by sending notices U/s.142(1) and Show cause letter. My submissions in this regard are as under: Assessing Officer has estimated income @ 35% of cash deposit Rs. 1,64,78,801. Infact cash deposit was Rs. 1,62,53,000 which was evident from the cash book submitted on 16/03/2015 during assessment proceedings. Assessing Officer has also accepted the fact that there was a cash withdrawal from bank by Appellant himself. Regarding, nonsubmission of revised cash book, is meaning that cash withdrawal by others should not be considered as cash withdrawal from bank which was not true, therefore appellant has not submitted. Appellant's representative has attended Assessment Proceedings on 27/03/2015 and has requested for time to prove identity of the persons making cash withdrawal from appellant's bank, for which Assessing officer has denied to give time, in view of assessment was getting time bared on 31/03/2015 (Para 4.4 of Assessment Order). Cash withdrawal was Rs. 70,00,500 by other persons. From the facts stated above, appellant was not given sufficient and reasonable opportunity to substantiate and to prove

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the identity of persons, those have withdrawn cash from appellant's book. Assessing Officer himself was unable to give time in view of assessment was getting time barred. In view of above fact, appellant request your Honor to admit additional evidence Under Rule 46A of Income Rule. Beside above, Assessing Officer has wrongly considered cash deposit Rs. 1,64,78,801 infact there was cash payment for expenses as well as appellant's drawing Rs.2,25,801 (Last four entries of cash book and entry dated 25/01/2010 from Catholic Syrian Bank Rs.82,933). After deducting above, balance amount Rs. 1,62,53,000 was in cash deposited bank. I would like to draw your kind attention to the fact that bank statements show entries, with name of the persons Rs.25,58,000 and Rs.44,42,500 cash withdraw by the persons, balance amount Rs.92,52,500 was withdrawn by appellant himself. During the appeal proceedings, before your Honor, Affidavit by Shri Mahendra Jain and Mithun Shetty, persons withdrawn cash from appellant's bank for appellant, were submitted. Both person were attended before Assessing Officer and statement was recorded U/s.131 under Income Tax Act. Para-9- Assessing Officer's observation in Remand Report that both parties stated that they are not associated it means that there was no business relation i.e. receipt for services or supply of goods. I would like to draw your kind attention to the reply given by Mahendra Jain: () Question No.7 saying that "I am just friend of Avinash Sutar. I don't have any business relation...." (ii) Question No.8 & 9 that he has withdrawn cash from Avinash Sutar's bank on behalf of Avinash Sutar on his request. Reply by Mithun Shetty: (iii) Question No.7 & 10 that he doesn't have business relation and association with appellant but has not denied friendship with appellant. (iv) Question No.8 & 9 that he has helped to withdraw cash from appellant bank and

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handed over to appellant. None of the answer given by both parties reveals that they are not knowing Avinash Sutar, the appellant. Assessing Officer's observation that Shri Mahendra Jain and Mithun Shetty are concealing true fact is Assessing Officer's wrong assumption inspite of there is no ambiguity in answering the questions dung the proceeding U/s. 131 of income tax Act. In view of above fact, appellant request your Honor to admit additional evidence Under Rule 46A of Income Rule and accept source of cash deposit in bank out of cash withdrawals by appellant himself they and Mahendra Jain and sales as per profit & Loss Account. For Alls. M. D. VORA & CO. Chartered Accountants 6. I have considered the facts of the case and the appellant's submissions.

8.Finally the CIT(A) considering the cash withdrawals and the cash book and the nature of the assessee business activities has restricted the addition to the extent @ 10 of the cash deposits and partly allowed the appeal observing at Para 7 to 8 of the order as under:

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the source of cash was out of withdrawals made from the bank. It is an undisputed fact that the assessee had some cash in hand which could have been used for subsequent cash deposits. However, it is also an undisputed fact that several bearer cheques were issued by the assessee to various persons and the cash withdrawn by them was shown as his cash in hand. The assessee has submitted affidavits of two of such persons during the appellate proceedings. However, during the remand proceedings, it was found by the AO that these persons were not paid any consideration for the work done by them on behalf of the assessee and they also did not have any business connection with the assessee. The above facts raise suspicion as to why so many persons would work for the assessee without any salary/commission. Further, the assessee could not furnish the revised cash book and the above affidavits during the course of assessment proceedings. In light of the above, am of the view that the assessee could not explain the cash deposits in entirety. Therefore, a disallowance in this regard is called for. Keeping in view the facts of the case and the additional evidences produced during the appellate proceedings, hereby restrict the addition made by the AO @10% of the cash deposits which comes to Rs. 16,47,880/-. Accordingly, the solitary Ground of appeal is 'Partly Allowed'. 8. In the result, the appeal is 'Partly Allowed'.

Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Honble Tribunal.

9.At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the addition to the

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extent of 10% of cash deposits overlooking the factual aspects and real estate market conditions. The assessee has maintained the cash book and the AO has not rejected the books of accounts and the doubts were raised only with respect to claim of cash withdrawals. The Ld.AR explained the reasons and the nature of the business conducted by the assessee and the difficulty in ascertaining the withdrawals in few cases. The Ld. AR substantiated the submissions with the details of villagers, the nature of receipts and payments, cash book, factual paper book and prayed for allowing the assessee appeal.

11.We heard the rival submissions and perused the material on record. The sole matrix of the disputed issues as envisaged by the Ld. AR that the CIT(A) has erred in sustaining the addition of 10% of the cash deposits irrespective of the fact that the assessee has

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maintained the books of accounts and the details of cash withdrawals were filed in the course of hearing. The Ld. AR also explained that the assessee has filed the return of income disclosing the total income of Rs. 2,58,670/-, whereas the AO has estimated the income @ 35% of the cash deposits which worked out to Rs. 52,67,580/-, the assessee in the course of hearing proceedings has submitted the cash book and the cash balance and cash deposits reflected on day to day basis. Whereas the AO after verifying the cash book has doubted the transactions made through friends and relatives, who has withdrawn the cash from bank accounts on behalf of the assessee. We find that the assessee has made an application under Rule 46A of the I T Rules before the CIT(A) for admission of additional evidence and the CIT(A) has obtained the remand report from the A.O. and the assssee has also filed the comments on the remand report. The asssessee has produced the affidavit of Mr.Mithun Shetty and Mr Mahinder Jain who are petty civil contractors, who have confirmed that Rs.41,25 lakhs and Rs.4 lakhs was withdrawn from the assessee’s bank accounts on behalf of the

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assessee and both these persons have also confirmed the bank withdrawls in the statement recorded u/s 131 of the Act before the assessing authority.

12.The Ld.AR emphasized that the assessee has made complete disclosure of facts &figures and filed the requisite information. Further the assessee has also explained in the proceedings, why there is a negative cash balances in the cash book on 26.03.2010 & 29.03.2010 . The Ld.AR has filed the submissions read as under:

The Assessee is an individual and was engaged in the business of dealing in plots of land as well as builders and developers during the years under consideration through his proprietorship M/s Shree Om Enterprises and M/s. Prathamesh Developers. The assessee purchased plots of land with a view to further develop it and then sell it to potential buyers or directly sell the plots of land as it is depending on the market demand and requirements of the buyers. The major area of operation of the assessee was in and around the rural parts of Navi Mumbai wherein the plots of land were situated. The Modus Operandi of the business of the assessee is explained as follows: a. The Assessee with a view to develop and/or trade in plots of lands first identifies the lands situated in and around the rural parts of Navi Mumbai and personally visits and conducts survey of land in order to determine whether the said land can be further developed or can be

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sold to the potential buyers for consideration considering the area of land, its availability, location of such land and other relevant factors. b. After determining that the land can be used for the purpose of his business, he personally contacts and visits the owners of land who are villagers residing in rural areas. He discusses the prospects of business in relation to the land held by such villagers and if they are interested to sell, they are paid a token amount to ensure that the land is not sold to any other party. This is a customary practice in the land trading business conducted with villagers who generally insist on cash payments and who may or may not have bank accounts in their names and are not much educated to know the procedures of banking transactions. The owners of land prefer cash payments over payments through banking channels due to the aforementioned reasons. Due to this typical nature of business it is absolutely necessary for the assessee to pay the token amount in cash so that a prospective deal is not lost and there is no consequent loss of opportunity for making profits out of the said deals to the assessee. C. The above mentioned process is a time consuming one and only after a number of visits and negotiations and a lot of convincing, the owners of land accept token money and are ready to sell their land. The assessee has to make a personal visit every time since he is the main person handling the business operations and the owners of land are reluctant to discuss the deals with any other unknown person sent by the assessee on his behalf. It may so happen that some of the lands are jointly held by various persons and in that scenario it becomes even more tedious and time consuming to finalize the deals since it takes a lot of convincing and negotiation to get

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everyone on board without which the transaction cannot be put through. d. Further, the assessee has to himself verify all the deeds and title documents to ascertain and satisfy himself that what is claimed by the owners is an actual matter of fact and there are no encumbrances with respect to title of the land. Only after thorough verification of documents with respect to the title of land and satisfying himself that there is no scope of getting cheated. the deal is finalized by the assessee based on the verbal negotiation and terms reached between the assessee and the land owners. e. The process explained above is repeated over and over again for each and every plot of land and token amount is paid by the assessee in cash by withdrawing it from his bank accounts. For this purpose, he takes help of few persons known to him by issuing a bearer cheque in their name since he is mostly busy in negotiation with villagers where the plot of land is located. f. After paying the token amount to the land owners, there are two possible scenarios i.e. either the deal is finalized and a Memorandum of Understanding (MOU) is entered with the land owners for purchase of land or the deal is not finalized and the token amount is returned to the assessee by the land owners and the same is again deposited in the bank accounts held by the assessee. All these deposits and withdrawals are duly accounted for in the books of accounts maintained by the assessee. g. Also, it is pertinent to mention that, in case the deal is finalized and MOU is entered with the owners of the land, the entire amount of consideration as mentioned in the MOU is paid through account payee cheques and the initial token money which was paid in cash to ensure that the deal is not lost is returned to the assessee by the

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land owners which is subsequently deposited in his bank account either by himself or by other persons on his behalf. Facts of the case in Brief for A.Y. 2010-11 [ITA No. 1030/MUM/20201 and A. Y. 2012-13 [ITA No. 1031/MUM/20201 and submissions of the assessee: In A.Y. 2010-11 and A.Y. 2012-13 assessee is in appeal before Your Honors in connection with the addition made on account of cash deposited in the bank account of the assessee u/s 69A of the Act. During the course of the assessment proceedings, the assessee was asked to provide details with respect to cash deposits made in the bank accounts held by him and the source of such cash deposits and how they were included in the books of accounts of the assessee. 5. In response to the details asked by the Ld. A.O. the assessee explained the entire modus operandi of his business. It was explained that the cash deposits in the bank accounts was out of assessee's own cash balance and from token money returned from the land owners. All these transactions were duly recorded in the books of accounts. 6. The Ld. A.O., from the details submitted by the assessee, observed that the assessee had issued bearer cheques to various persons and the withdrawals from those cheques were claimed by the assessee as available cash in his own hands. The Assessee was asked to explain as to why the cash withdrawals through bearer cheques issued to different persons were claimed as available cash in hands of the assessee. In response to said query, vide letter dated 27.03.2015, the assessee explained that due to the nature of his business, many times he had to send other persons i.e. friends/relatives/employees to withdraw the cash from

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the bank on his behalf so that he can pay token money to the villagers with respect to the MOU's entered by him for purchase of plot (Copy of the said letter is attached at Page No. 1 & 34 of the Paperbook-1). The Assessee requested the Ld. A.O. to provide time to furnish the details of persons in whose name the bearer cheques were issued. However, since the assessment was getting time barred the A.O. did not provide the requested time to the assessee for furnishing the details and the A.O. reached a conclusion that the assessee could not substantiate the entire source of cash deposits as shown in the cash book as no evidence was submitted by the assessee to corroborate that the cash withdrawal from the bank accounts, was actually cash available in the hands of the assessee. Therefore, out of the total cash deposit of Rs. 1,64,78,801/- (which is actually Rs. 1,62,53,000/-) 35% i.e. Rs. 57,67,580/- was added to the total income as unexplained money u/s 69A of the Act for A.Y. 2010-11. Similarly, out of the total cash deposit of Rs. 2,07,46,793/- (which is actually Rs. 2,07,44,000/-) 35% i.e. Rs. 72,61,377/- was added to the total income as unexplained money u/s 69A of the Act for A.Y. 2012-13. Aggrieved by the said additions the assessee filed an appeal before the Ld. CIT(A)-26, Mumbai. Synopsis of proceedings before Ld. CIT(A)-26, Mumbai During the course of appellate proceedings, the assessee explained in detail about the source of cash deposits for both A.Y. 2010-11 and A.Y. 2012-13 as follows: For A.Y. 2010-11: Cash deposit of Rs. 1,62,53,000/- was made out of the cash withdrawals made during the year. Out of the total amount Rs. 92,52,500/- was withdrawn by assessee

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himself and the balance sum of Rs. 70,00,500/- was withdrawn by his friends and acquaintances as evident from the bank statements. We considering the facts, circumstances and submissions as discussed above found that the CIT(A) has over looked various factual aspects/evidences and granted the partial relief. Whereas, the asssessee has maintained the books of accounts and filed the return of income. The Asssessing officer has estimated the income based on the cash deposits and has not rejected the Audited books of accounts and the asssessee has complied with the directions of the appellate authorities and filed the requisite details. Accordingly, we set aside the order of the CIT(A) and direct the AO to delete the addition and allow the grounds of appeal in favour of the assessee and allow the appeal filed by the asssessee.

ITA No. 1030/Mum/2020 A.Y 2012-13

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of the CIT(A) and direct the AO to delete the addition and allow the appeal filed by the assessee.

ITA 1029/Mum/2020 A.Y 2011-12

14.The assessee has filed the appeal ITA. 1029/Mum/2020 and the revenue has filed the cross appeal in ITA No. 1321/Mum/2020 against the order of the CIT(A). For the sake of convenience, we shall take up the assessee appeal in ITA No. 1029/Mum/2020 as a lead case and facts narrated. The assessee has filed the revised grounds of appeal:

1.1 On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income- Tax (Appeals) - 26 has erred in confirming the addition to the extent of Rs. 81,32,465/- u/s 69C of the Income Tax Act, 1961 being 30% of cash received from sale of plots of land. 1.2 On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income- Tax (Appeals) - 26 has erred in confirming the addition to the extent of Rs.90,52,200/- u/s 68 of the Income Tax Act, 1961 as unexplained cash credit being 30% of cash deposited in the bank accounts held by the appellant. 2. The Appellant craves to add, alter or delete all or modify any or all the above grounds of appeal.

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venture project at plot No. 65, Sector -50, Nerul, Navi Mumbai. The assessee was called by the A.O. to submit the memorandum of Undertaking(MOU) and supporting details and was complied. Whereas, the A.O. was not satisfied with the details and has treated a sum of Rs. 2,88,14,400/- being the purchase value of 9 plots entered into MOU entered during the F.Y 2010-11 as unexplained expenditure and made addition u/s 69C of the Act.

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6.3.1. The assessee's submission is without any supporting evidences and therefore the same is not reliable. As far as the sources of the cash being the sale of plots, the assessee needs to provide the details of the buyers in order to establish the sources of such cash. No such details have been provided. The assessee's explanation is therefore rejected in the absence of any supporting evidences. Despite ample opportunities, the assessee has not been able to provide any cogent explanation for hundreds of credit entries in its bank accounts as mentioned above. In view of this, it is hereby held that the assessee has not been able to furnish the

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sources of the cash deposits to the tune of Rs.3,01,74,004/- in his six bank accounts as mentioned above. The amount of Rs.3,01,74,004/- is therefore added to the total income of the assessee under section 69C of the Act as unexplained investment. Penalty proceedings under section 271(1)(c) of Act to be initiated simultaneously for furnishing of inaccurate particulars of income and also for concealment of income.

6.3.2. Further, despite ample opportunities, the assessee could not explain source of cheque deposit of Rs.2,31,55,000/-. In view of this, it is held that 20% of the credit entries by way of cheque represent unaccounted income of the assessee. Accordingly, a sum of Rs.46,31,000/- is treated as unaccounted income of the assessee. Penalty proceedings under section 271(1)(c) of Act to be initiated simultaneously for furnishing of inaccurate particulars of income and also for concealment of income.

Similarly the AO on perusal of profit & loss account found that the asssessee has claimed expenditure incurred for developing of open plots. Since, the asssessee has not provided specific explanations on the expenses, the A.O. has made estimation of disallowance of expenses to the extent of Rs.5 lacs and determined the total income of Rs. 6,60,46,250/- and passed the order u/s 143(3) of the Act on 28.03.2014.

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During appellate proceedings, the assessee filed written submission on 19.01.2017, the relevant part from which is reproduced as under- Ground No 1: Ld. AO has erred in making addition of Rs.2,88,14,400/- being the cost of purchase of plots purchased/entered into MOU as unexplained expenditure w's 69C of the Act and also us 40A(3) of the Act. During the year under review, appellant has entered into MOU for purchase of following plots of land for a sum of Rs.3,44,89,400/-: Appellant's Submission: Ld. AO has wrongly mentioned in the assessment order that no MOU were submitted however during assessment proceedings, appellant vide letter dated 03/03/2014 had submitted copy of allotment letters in case of advance of flats and copy of memorandum of understanding in case of sale of plots. Statement showing purchase of plots corresponding sale of plots and plots into joint venture

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was submitted vide letter dated 03/03/2014 which clearly shows the plots which has been sold. Therefore, appellant has explained the source of purchase of plots. Ld. AO has not appreciated the fact that memorandum of understanding for purchase of plots has been submitted by the appellant during the assessment proceedings. Ld. AO has not doubted the sales made by the assessee and with a logical view the sales can be made only when there is a corresponding purchase. For this, we rely on the Jaipur Bench of ITAT ruling in 31 DTR 456- Nisraj Real Estate held that unverified purchases made by assessee could not be treated as unexplained expense u/s 69C and no addition can be made thereof us 69C proviso there under -as once sales were made by assessee, purchases were obviously made. Appellant in his submission vide letter dated 03.03.2014 has clarified that it was a mistake to say payments were made through bearer cheque however it was made by account payee cheque. Appellant has submitted copy of all bank statements, plot-wise statement name of the person, cheque no., date and amount; where payments were reflected in the name of the plot owners and hence it was through account payee cheque. Section 40A(3) provides that any expenditure incurred by an assessee (whether individual, company, firm etc.) above Rs. 20000/- other than by account payee cheque or draft shall not be allowed as a deduction. Section 40A(3) can be invoked only when there is payment made other than by account payee cheque or draft. Appellant has made payment vide account payee cheque and hence no payment falls under the ambit of Section 40A(3) of the IT Act. AO clearly have not gone through the evidences given by the appellant as he has mentioned in his assessment

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order that assessee did not provide any evidence like bank account detail etc. to support his claim for purchase of plot of land through account payee cheques/DDs. Whereas that's clearly wrong because appellant himself had submitted bank statements during proceedings & Ld. AO has obtained by issuing notice u/s 133(6) from banks; wherein the name of the persons to whom payments were made are clearly reflected. Hence, he has failed to appreciate the fact and made addition w/s 40A(3) without any base. Payments were made through bank via account payee cheque for purchase of plots. The same are highlighted in the bank statements which are enclosed herewith for your perusal. Source of the payments made for purchase of plot can be seen from the bank statements which is amount received for sale of plots and flat booking charges. Ground No 2: Ld. AO has erred in making additions of Rs.3,01,74,004/- being cash deposits in six bank accounts. Assessee maintains six bank accounts for the year under review. There were certain cash deposits of Rs.3,01,74,004/- for the year under review. Appellant's Submission: Ld. AO. has wrongly applied section 69C of the Act which relates to unexplained expenditure. Cash has been deposited in bank and therefore no question of unexplained expenditure arises. Several details and documents were filed by the appellant on various dates which has been completely ignored by the Ld. AO while passing the assessment order. Therefore it is clear that the Ld AO has not applied his mind and has passed the order without proper verification of documents and without any proper base. Appellant had sold plots of land to M/s. Ideal Enterprises, M/s. S H Developers and Virendra Yadav (Om Shakti Developers). As stated earlier,

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copy of Memorandum of Understanding entered into between the sales party and the appellant was submitted vide letter dated 03.03.2014 during assessment proceedings which clearly showed the sales transaction entered into & terms of payment is also mentioned. Total amount received in cash is Rs.2,71,08,217/-. Statement giving name of the debtor, date and amount of receipt is enclosed herewith for your kind perusal. Copy of fund flow statement was submitted vide letter dated 18.02.2014. Please find enclosed herewith day-wise cash book for the year. Ground No 3: Ld. AO has erred in making additions of Rs.46,31,000/- being 20% of credit entries by way of cheque Appellant's Submission: Appellant has received cheque deposit of Rs.2,31,55,000/- which consist of amount received for sale of plots (Rs.97,20,000/-), flat booking (Rs.1,31,35,000/-) and loan returns (Rs.3,00,000). As stated earlier, Copies of MOU for sale of plots were submitted vide letter dated 03.03.14 for the year during assessment proceedings. Sample copies of allotment letter for flats were enclosed during assessment proceedings vide letter dated 03.03.14. Please find enclosed herewith a statement showing bank-wise/monthwise/ head-wise cheque deposits prepared from books of accounts & bank statements. Ld. AO's action in adding estimated 20% income of cheque deposits is arbitrary as there was neither base nor clear-cut finding. Ground No 4: Ld. AO has erred in making addition of Rs.5,00,000/- on account of material purchased and labour charges paid. Appellant has incurred Rs.29,73,478/- and Rs.11,10,965/- for construction material purchase and labor charges. Appellant's submission:

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As seen from the profit and loss account, the total construction material is Rs.29,73,478/- out of which Rs.24,53,223/- is the opening WIP and Rs.5,20,255/- has been incurred during the year for purpose of business. Labour charges Rs. 11,10,965/- was incurred for developing land. The nature of the business of the appellant is developing Land and hence the expense would be incurred for the same. Sample bill were produced during assessment proceedings. Hence, Ld. AO has failed to appreciate the vouchers and bills and has arbitrarily without any base disallowed Rs.5,00,000/-. 19.Further the assessee has filed the additional evidences consisting of copy of bank statements highlighting payments for purchase of plots, copy of debtor statement disclosing cash received on account of sale of plots, day wise cash book, copy of statement showing bank wise/ month wise/head wise cheque deposits in the appellate proceedings. The CIT(A) has forwarded the additional evidence to the file of A.O by letter dated 22.9.2017 to examine and verify the facts and submit the comments/report. The AO has furnished the remand report and the assessee has also filed comments on the remand report. The remand report dated 13.4.2018 was furnished by the A.O dealt at Page 6 Para 5.1 of the order as under:

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5.1 The AO furnished his report dated 13.04.2018, the crux of comments offered by the AO is as under- a) The AO has reiterated the facts of the case and findings of the AO as mentioned i the assessment order with regard to the various additions made u/s. 69C and 40A(3 of the Act. b) It is observed that the copy of MOU and fund flow statements were already submitted by the assessee vide letter dated 18.12.2014, which was noted in the order sheet also. c) On perusal of the order sheet regarding sale of plots made by the assessee in the F.Y. 2010-11, it is observed that the assessee has sold 11 wing plots of land and received the consideration in both cash and cheque. With respect to the Plot no. 63A, Sector 50, Nerul, the assessee has shown sales value of Rs. 35,00,000/- however, as per the details submitted, the assessee has received Rs. 36,00,000/- (Rs. 30,20,000/- in cash and Rs. 5,80,000/- in cheque). d) Notice u/s. 133(6) dated 21.02.2018 were issued to the buyers mentioned by the assessee to verify the cash components paid by them. However, no reply has been furnished by the parties in spite of service of the notice.

5.2 In view of the above, vide letter dated 12.11.2018, comments of the assesse were sought on the remand report submitted by the AO. In response, the assesse furnished a reply vide letter dated 12.03.2019 which is reproduced as under –

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I would like to draw your kind attention to the fact that As per Para-2 on page 3 of Remand Repor Assessing Officer has stated that the copy of MOU and Fund Flow statements were already submitted b Assessee wide letter dated 18/12/2014 (Typical Error Correct date should be 18/02/2014) which wo noted in the Order Sheet also. As per Para-4 on Page 3 of Remand Report, stated that on the persual of the sheet (Though word Order missing, it means Order Sheet), details of sale of Plot made by assessee in FY. 2010-11, it is observe that, assessee has sold following plots, the details of which are as under: As Para 4.3 of Assessment Order, Assessing Officer has stated that copy of Agreement / MOU f purchase and sale of all plots were not given. From the facts stated above, Assessing Officer, has wrong stated in Assessment Order that assessee has failed to submit details of sales and purchases plots duri assessment proceedings. In view of above, submissions filed before your good selves, at Annexure "B" and "C" are not additional evidences. Hence it may be considered. Beside above, I would like to draw your kind attention to the fact that Assessing Officer has not rejected the books of accounts. Thereby Assessing Officer has accepted the financial statements like Profit & Loss Account and Balance Sheet for financial year. In view of above, source of cash and cheque deposited in bank is out of plots sale receipt (Appears in Profit & Loss Account Rs.3,82,28,217), advance against sale Rs.1,31,35,000 (Appears in Balance Sheet) and out of cash withdrawal from bank (Appears in Bank Statements) were said to be explained and justified. I request your Honor, Addition made in income U/s. 69C for purchase of plot Rs.3,44,89,400; cash deposited in bank Rs.3,01,74,004 and estimation of income at 20% of cheque deposit in bank Rs.2,31,55,000 is not justified an

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according to Law. Beside, it was proved that payments for purchase of plot were made by Account Payee cheque, as evidence from Banker's Certificate filed wide letter dated 08/08/2017, hence addition Section 40A(3) is not justified and not according to Law, same may be deleted.

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proceedings, the AO has not controverted the contention of the assessee of making the payments through account payee cheques. Therefore, the decision of the AO treating the payments made for the purchase of plots in contravention of section 40A(3) of the Act is hereby rejected. 7.2 With regard to the source of payments made for the purchase of the above mentioned 9 plots. The assessee has contended that the same was from the advances against sale of plots, booking amount received from various parties and loan taken from various parties. During the remand proceedings, the assessee submitted the details of the amount received from various parties on the sale of plots. As per the report submitted by the AO, an amount of Rs. 2,71,08,217/- was received in cash from the sale of 7 plots. The AO issued notice u/s. 133(6) of the Act, to verify the cash payments received from the purchase parties, however no replies were received even after substantial lapse of time. In light of the above, the source of the amount used for the purchase of the plots could not be verified. Therefore, a certain disallowance is called for in this regard. In my considered opinion a disallowance of 30% of the amount (Rs. 2,71,08,217/-) which remained to be verified, shall be appropriate. Hence, the addition made by the AO is restricted to Rs. 81,32,465/-. Accordingly, Ground no. 1 is 'Partly Allowed

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9.The Ground no. 3 is against the addition of Rs. 46,31,000/- made by the AO o account of unaccounted income. With respect to the cheque/other deposits in bar account of Rs. 2,31,55,000/-, the AO held 20% of the cheque deposits which comes Rs. 46,31,000/- as unaccounted income of the assessee. 9.1 During the course of appellate proceedings, the assessee has submitted that t assessee has received cheque deposits of Rs. 2,31,55,000/- which consist of amount received for sale of plots, flat booking and loan returns. The assessee has also furnished relevant bank

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statements and other documents in this regard. I find force in the arguments put forth by the assessee. In light of the above, I hereby delete the addition made @20% of the cheque/other deposits by the AO. Accordingly, Ground no. 3 is 'Allowed'.

The Ground no. 4 is against the addition of Rs. 5,00,000/- made by the AO on account of material purchase and labour charges paid. The assessee has submitted that the total construction material is Rs.29,73,478/- out of which Rs.24,53,223/- is the opening WIP and Rs.5,20,255/- has been incurred during the year for purpose of business. Labour charges of Rs. 11,10,965/- were incurred for developing land. Sample bills for the same were also submitted during the course of assessment and appellate proceedings. In view of the above, and in absence of any particular finding of the AO in making the above disallowance, I delete the addition made by the AO. Accordingly, Ground no. 4 is 'Allowed' Finally the CIT(A) has partly allowed the asssessee appeal. Aggrieved by the CIT(A) order, the assessee and the revenue has filed an appeal before the Hon’ble Tribunal

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u/s 69C of the Act on cash received from sale of plots of Land , further the CIT(A) erred in sustaining partial addition as unexplained cash credit U/sec68 of the Act on the cash deposited in the bank accounts by the asssessee. The CIT(A) has also erred in overlooking the facts of maintenance of books of accounts and the cash received on sale of plots and the cash deposited in bank accounts are reflected in the financial statements and was explained in the course of hearing proceedings. The Ld. AR also emphasized on the material evidences, the fund flow statement, cash book, MOU of sale of plots, cash withdrawals etc. The Ld.AR has substantiated the submissions with factual paper book, evidences and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld.DR submitted that the revenue is contesting in appeal on the relief granted to the assessee by the appellate authority and supported the order of the AO.

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plot from customers u/s 69C of the Act. We found that the assessee has maintained the books of accounts and the explanations were filed before the lower authorities on the disputed issue. The assessee has filed the written submissions supported with the material evidence in the hearing proceedings explaining the nature of business activities of the asssessee and highlighting the information supporting the claims in the financial statements. In the assessment proceedings, the AO has observed that the assessee had purchased plots of land aggregating to Rs. 3.44,89,400/-.Whereas out of 11 plots purchased, 2 plots were purchased in the F.Y.2009-10 for Rs. 56,75,000/-. The Asssessing officer has called for the sources of purchases with supporting evidences.The asssessee has explained that he is engaged in the business of trading in plots of lands which are purchased from villagers in and around Navi Mumbai area. The purchase of plots of land are supported by Memorandum of Understanding (MOUs) entered with the owners of land i.e. villagers and the payments for those purchases are made by account payee cheques. Subsequently, the plots are sold to third parties for

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which consideration was received partly in cash and by cheque. The cash received from sale of plots are deposited in the bank accounts maintained by the assessee. We find the Ld.AR has highlighted the letter dated 18-02-2014 &3-032014 filed explaining the transactions before the A.O, placed at Page No. 118 to 122 of the Paper book-II filed along with documentary evidences/ material in the asssesseement proceedings. Whereas the assessing officer has observed at Para 4.2 of the order that the assessee had filed the sources of purchase of plots are in the nature of advances received against sale of plot, booking amount received from various parties for joint venture project and loan returned from various parties. Since certain specific details were not brought on record, the A.O. has treated the purchase cost of 9 plots aggregating to Rs.2,88,14,400/- as unexplained expenditure u/s 69C of the Act.

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supported with the Copy of MOU's and allotment letters entered with various persons/customers to whom the plots were sold along with the statement of plots purchase and sale details in F.Y.2010-11. However, the A.O. in Para 6.3.1 of the assessment order had alleged that supporting evidences were not filed is baseless. The Ld.AR has mentioned that the assessee had submitted the statement of purchase and sale of plots in the letter dated 3-03-2014. But the A.O has overlooked the submissions of the assessee and has erroneously concluded that the assessee was not able to furnish the sources of cash deposits and made addition of Rs.3,01,74,004/-u/s 69C of the Act. In the appellate proceedings before the CIT(A), the assessee has filed the written submission dated 19.01.2017 along with the additional evidences being (i) Copy of bank statements highlighting payments made for purchase of plots of land placed at page 241 to 266 of the paper book-II(ii)copy of the debtor statement disclosing cash received on sale of plots placed at page 267 and (iii) Day wise cash book from 1-04-2010 to 31-03-2011 placed at page 268 to 272 of paper book-II. Subsequently, the CIT(A), vide

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letter dated 22.09.2017 directed the Assessing officer to examine the veracity of the written submissions and additional evidences submitted by the assessee. In reply, the A.O. in letter dated 13.04.2018 accepted the facts that the copy of MOUs and fund flow statement were submitted by the assessee during the course of assessment proceedings but the notice U/sec133(6) of the act issued on the buyers were not replied.In response to the remand report, the assessee has filed rejoinder on 12.03.2019 and contended that the details and documents furnished in the asssesseement proceedings were overlooked by the A.O. and but were accepted in the remand report. Whereas, the Audited Books of Accounts were not rejected by the Asssessing officer and accepted the sales recorded in financial statements. The source of cash and cheque receipts are from the sale of plots and the advances received from the customers, which are duly recorded in the financial statements and were disclosed in the Return of Income filed for A.Y.2011-12. The Ld.AR emphasized that the source of cash receipts were duly explained and which cannot be disputed.

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of tax in the form of sales disclosed in the audited profit &loss account filed along with the return of income. Hence the addition sustained by the CIT(A) is subject to double taxation. Further the provisions of section 69C of the Act are deeming provisions for 'unexplained expenditure' as income of the assessee . Whereas Rs.81,32,465/- is part of Income from Sale of Plots' and not 'expenditure' that could not be deemed as income of the assessee u/s 69C of the Act.

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unexplained cash credits u/s 68 of the Act which is not only illegal but is totally unjust and prejudicial to the assessee and the additions partly sustained by the Ld. CIT(A) are liable to be deleted due to multiplicity of additions of the same amount to the income of the assessee which was already offered to tax as sales at the time of filing of Return. The assessee had purchased 9 plots of lands for a total consideration of Rs.2,88,14,400/- which are duly accounted for in the audited books of accounts by the assessee. During the course of assessment proceedings, the assessee by letter dated 03.03.2014 had explained that the above mentioned plots were purchased from the funds received from sale of plots of land and the payment for the purchase of plots were made through banking channel. The assessee had submitted the details and documentary evidences in support of claims and the Ld.AR has demonstrated the requisite information (i) details of persons/parties from whom the plots were purchased placed at Page Nos. 123-127 of the paper book-II (ii)Copy of Memorandum of Understanding (MOUs) entered with the sellers for purchase of plot of land

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placed at Page Nos. 128-177 of the Paperbook (iii) details of sellers of plots, details of cheque no,date and amounts paid disclosed at Page Nos. 179-184 of the Paper book(iv) Copy of bank book high lighting the amount paid to the sellers for purchase of plots referred at Page Nos. 185-198 of the Paperbook-II.

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by the asssessee to substantiate the purchase and sale of plots of land.

a. Copy of Bank statements highlighting the payments made for purchase of plots placed at Page Nos. 241- 266 of the Paper book-II

b. Copy of Debtor statement showing cash received on account of sale of plots placed at Page Nos. 267 of paper book

c. Copy of day-wise cash book for the financial year 2010-11 at Page Nos. 268-272 of the paper book

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received in cash from M/s. S.H. Developers can be verified from the Debtors statement submitted before the Ld. CIT(A) placed at Page Nos. 267 of the Paper book-II. Further these MOUs were signed by both the parties, as per the terms agreed upon, plot was transferred to the buyer and consideration paid to the assessee was recorded/ reflected in his books of accounts and offered to tax in his return of income. The sale transactions were complete in every respect and there was no apparent reason to doubt as they were already recorded /incorporated in the books of accounts and cannot be disputed.The evidences submitted by the assessee during the course of assessment proceedings as well as in the appellate proceedings prove beyond doubt that purchase of plots of land was out of the funds generated from sale of plots. The asssessee has submitted Fund Flow Statement in the course of assessment proceedings and it is apparent that the assessee had sufficient balance available for making payments for purchase of plots of land. Further, these payments were made through account payee cheques and are duly recorded in the regular books of accounts maintained by the

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assessee. Considering the fund flow statement, the assessee had sufficient cash balance available with to make the cash deposits in banks aggregating to Rs. 2,99,24.004/- during the financial year 2010-11.The source of cash deposits and purchase of plots were explained by the assessee exhaustively with documentary evidences submitted before the lower authorities.

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warranted. The Ld.AR relied on the decision of Hon'ble Jurisdictional High Court in case of CIT Vs. Om Prakash Jain (2010) 322 ITR 362 (Bom.) placed at Page Nos. 275-278 of the Paperbook-II. The Hon'ble Jurisdictional Court has held as under:

"6. After hearing the learned counsel, we are of the opinion that the order of the Tribunal cannot be sustained. In the first instance apart from the retracted statement of 21.1.2004, subsequent statement made on 25.3.2004 has not been considered. Secondly, there was documentary evidence on record. The A.O. while considering whether the retraction was under duress or coercion had also to consider the genuineness of the documents which were produced as this is documentary evidence. The test of evidentiary value of the oral evidence and the documentary evidence has to be borne in mind. The A.O. will have to comply with the settled principle of law. Documentary evidence if genuine must prevail over the oral statement."

The Ld.AR mentioned that the Hon'ble Jurisdictional High Court pressed upon the importance of

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documentary evidence i.e. the documentary evidence, if found genuine, must prevail over oral statement. In the present case, the appellant/assessee had submitted voluminous documentary evidences and the geninueness was not doubted by the A.O or the CIT(A). Further there is no adverse oral statement by any party in the case of the assessee which places the case of the assessee on a better footing. Moreover, the assessee cannot be held responsible for non- compliance of notices u/s 133(6) of the Act by third parties especially in the light of vital documentary evidences submitted. When the documentary evidences are found genuine, they must be accepted and no disallowance is sustained.

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more than mere suspicion to fasten any liability on the assessee. The Ld.AR relied on the decision of Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) placed at Page Nos. 279-286 of the Paper book-II where the court has held as under:

"... it is equally clear that in making the assessment under sub- section 3 of section 23 of the, Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than mere suspicion to support the assessment under section 23(3)."

Considering the law laid down by the Apex Court, it is clear that there must be some tangible evidence with the department to make addition and to fasten liability on the assesssee. No addition can be made merely on suspicion which has been done by the A.O. and partly by the CIT(A) to the extent of 30% of cash receipts and there is no corroborative evidence placed on record to support such an adverse view against the

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assessee and therefore the disallowance made by the Ld. CIT(A) is illegal, arbitrary and liable to be deleted.

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comprehension of the assessee. The Ld.AR relied on the decision of Hon'ble Supreme Court in the case of Mahaveer Kumar Jain vs. CIT, Jaipur ( 255 taxman 161) placed at Page Nos. 287-295 of the Paperbook-II were the Honble Court has observed as under:

"13. The above referred cases make it clear that there is no prohibition as such on double taxation provided that the legislature contains a special provision in this regard. Now, the only question remains to be decided is whether in fact there is a specific provision for including the income earned from the Sikkim lottery ticket prior to 01.04.1990 and after 1975, in the income-tax return or not. We have gone through the relevant provisions but there seems to be no such provision in the IT Act wherein a specific provision has been made by the legislature for including such an income by an assessee from lottery ticket. In the absence of any such provision, the assessee in the present case cannot be subjected to double taxation. Furthermore, a taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so

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compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act,"

"69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the

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opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year"

Section 69C of the Act creates a deeming fiction where an expenditure is deemed to the income of the assessee if the conditions envisaged therein are satisfied. From perusal of the provisions of section 69C of the Act, it is seen that addition under that section can be made when following two conditions are cumulatively satisfied:

a. The assessee has incurred an expenditure in the financial year; and

b. The assessee offers no explanation about the source of such expenditure or the explanation provided by the assessee is not satisfactory in the opinion of the A.O.

In the present case, the assessee had incurred expenditure i.e. purchase of plots of land which were duly accounted in the books of accounts and paid through account payee cheques. The assessee had

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also offered an explanation regarding source of such expenditure along with documentary evidences which were not doubted either by the A.O. or by the CIT(A). However, from the order passed by the CIT(A) it is clear that there is no specific finding that how the explanations provided and documentary evidences submitted by the assessee were unsatisfactory. It is merely stated that a certain disallowance i.e. 30% of cash receipts on sale of plots of land i.e. 30% of Rs. 2.71,08,217/- is called for and since no replies were received from the parties from whom cash was received towards sale of plots. In the absence of any such adverse finding, the addition cannot be sustained u/s 69C of the Act.

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Farms Pvt. Ltd. vs. Income Tax Officer in ITA No. 4903/DEL/2019 placed at Page Nos. 296-303 of the Paper book-II and the Hon'ble Tribunal has observed at Page 5 Para 5 & 6 read as under:

“5….."There is no dispute with regard to the fact that the Assessing Officer in the assessment order has stated addition regarding unexplained expenditure u/s 69C of the Act. The Revenue has not brought on record that mentioning of Section 69C was on account of any typographical error.....

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change of provision of law. As per Section 250 of the Act, the learned CIT (Appeals) is empowered to make further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report to the learned CIT(Appeals). As per Section 251(1)(a), in appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment, but there is no such power provided by the law that learned CIT(Appeals) could change the provision of law qua the item of which assessment was made. Therefore, in the absence of such power, learned CIT(Appeals) could not have treated the addition made u/s 69C as the addition made u/s 69B and the same is contrary to the spirit of the Act."

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addition was made by the A.O. tantamount to assess a new source of income not forming part of the assessment order which is ultra vires on the powers of CIT(A).With respect to the addition sustained by the CIT(A) u/s 68 of the Act of Rs. 90,52,200/- treating the cash deposits made by the assessee as unexplained cash credit the provisions of secation 68 of the Act are read as under:

"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:"

a. Any sum is found credited in the books of an assessee maintained for a previous year,

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b. The assessee offers no explanation about the nature and source of such sum, or

c. The explanation offered by him is, in the opinion of the Assessing Officer not satisfactory.

The provisions of section 68 of the Act are applicable only in cases where the nature and source of the sum credited in books of accounts are not explained or explanation offered is not satisfactory in the opinion of the A.O. In this regard, it is submitted that the assessee had explained both the nature and source of cash credited in the books of accounts to the satisfaction of the department which is evident from the following facts:

a. The assessee had explained that the cash deposits were out of the cash received from sale of plots of land and the nature of transaction being sale of plots and source of cash received was explained by the assessee.

b. The assessee has submitted the copy of MOUs entered with the buyers of plots of land and also allotment letters of plots sold to various buyers and

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day wise cash book in which the cash received from sale of plots is recorded. Therefore, the explanation was well supported by documentary evidences which were not doubted either by Ld. A.O. or by CIT(A) and thus transactions were explained to the satisfaction of the department and therefore the cash is deposited from cash generated out of sale of plots of lands and is well outside the purview of section 68 of the Act.

c. Further both the purchase and sale of plots were duly accounted/incorporated in the books of accounts and the business income derived from it was offered to tax in the Profit & Loss Account as well as disclosed in the return of Income and once the income has already been offered to tax as sales it cannot be again treated as unexplained credit and section 68 cannot be invoked for making addition of income which has already been offered to tax under other applicable provisions of the Act.

The asssessee has relied on the decision of Hon'ble Ahmedabad Tribunal in the case of Shree Sanand Textiles Industries Ltd. vs. The Dy. CIT (OSD) Circle-8 in ITA No. 995/Ahd/2014 dated 6-1-2020 placed at

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Page nos. 304-329 of Paperbook-II wherein the Hon'ble Tribunal has observed at Page 18 Para 9.5 read as under:

"9.5.... we note that the provisions section 68 of the can attracted where there is credit found in books accounts and assessee failed offer any explanation or offer made by assessee is satisfactory in opinion the assessing officer. The assessee has explained to authorities below that the impugned amount represents the sale which has not been doubted by the authorities below. Thus in considered view, the impugned amount cannot treated unexplained cash credit under section 68 of Act merely on the ground that assessee failed furnish the details of existence of parties. 9.6. also note that provisions section cannot applied relation the sales receipt shown by assessee in books of accounts. It because the sales receipt has already been shown the books of accounts as income at time of only."

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land unacceptable especially in light of the documentary evidences submitted by assessee which proved beyond doubt that deposits were made out of cash received from sale of plots and the sustainment of partial addition by the CIT(A) u/s 68 of Act is completely outside purview of section and liable to be deleted. We find the CIT(A) has granted the partial relief but has not relied on the various vitals facts filed in the course of hearing. We find the submissions of the Ld.AR are realistic and duly supported with the documentary evidences and judicial decisions which cannot be overlooked. Whereas the assessee has explained the nature of business, produced the books of accounts maintained and explained the dates of cash deposits Accordingly we find the order of the CIT(A) on the disputed issues raised by the asssessee cannot be sustained and set-aside the order of the CIT(A).Accordingly, we direct the Asssessing officer to delete the additions and allow the grounds of appeal in favour of the assessee and allow the appeal filed by the asssessee.

ITA No. 1321/Mum/2020, A.Y 2011-12

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(1) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition u/s.69C of the Act on account of unexplained expenditure on the purchase of 9 plots, made by the A.O., to Rs.81,32,465/- as against Rs.2,88,14,400/- without appreciating the fact the source of amount used for purchase of plots could not be established and also the assessee has not furnished any additional documentary evidences during the appellate proceedings for verification"? or remand report proceedings for verification.

(2) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition u/s.69C of the Act on account of unexplained expenditure on the purchase of 9 plots, made by the A.O., to Rs.81,32,465/- as against Rs.2,88,14,400/- without assigning any reasons or justification based on which the Ld.CIT(A) has arrived on the conclusion to restrict the addition to 30% of the total cash received from sale of 7 plots"?

(3) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition u/s.69C of the Act on account of cash deposits to Rs.90,52,200/- as against Rs.3,01,74,004/- without appreciating the fact that assessee has failed to establish the source of cash deposits."?

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(4) The appellant prays that the order of Ld. CIT (A) on the above grounds be reversed and that of the Assessing officer be restored.

(5) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 41. At the time of hearing the Ld. DR has submitted that the CIT(A) has erred in granting the relief which is challenged by the revenue in the grounds of appeal. The CIT(A) overlooked the facts that the assessee has not maintained proper books of accounts and the explanations on facts are not self explanatory and supported the order of the Asssessing officer. Per Contra, the Ld.AR submitted that the asssesee has challenged the partial addition sustained by the CIT(A) in the asssessee appeal and made submissions.

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view. Accordingly the grounds of appeal of the revenue are dismissed.

Order pronounced in the open court on 12.12.2022.

Sd/- Sd/- (B R Baskaran) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated 12.12.2022

KRK, PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / The CIT(A) 4. आयकर आयु�त(अपील) / Concerned CIT �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai