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Facts
The assessee filed his return of income and declared gross total income. The case was selected for limited scrutiny to examine cash deposits. The assessee stated that a capital asset was sold for Rs. 31 lakhs and the entire sale consideration was received in cash. However, the sale deed reflected a value of Rs. 17,56,000/-, with Rs. 16,71,000/- received in cash.
Held
The Tribunal held that the AO treated the cash deposit above the registered value as unexplained income under section 69A. However, the assessee had offered the full sale consideration of Rs. 30 lakhs as capital gain, and this was not disturbed by the AO. The Tribunal found a direct nexus between the cash received and the sale of the property, concluding that the source of the cash deposit was explained.
Key Issues
Whether the cash deposit made by the assessee over and above the registered value of the property sold is to be treated as unexplained income under section 69A when the assessee has offered the entire sale consideration as capital gain.
Sections Cited
143(2), 69A, 115BBE
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Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against the ex-parte Order passed by the CIT(A) vide DIN &Order No: ITBA/NFAC/S/250/2024- 25/1075139271(1) dated 27.03.2025, challenging the addition made by the AO of Rs.13,41,000/- towards cash deposits in bank account.
Briefly stated, the facts of the case are that assessee filed his return of income on 18.07.2017 declaring gross total income of Rs.6,85,225/- and total income of Rs.5,29,730/- after claiming deduction of Rs.1,55,500/- under Chapter VI A of the Act. In the income tax return, assessee has admitted income from salary of Rs.6,09,911/- income from other sources of Rs.75,314/-. The case was selected for limited scrutiny to examine the issue of cash deposits during the year. Accordingly, notice under section 143(2) of the Act was issued and served to the assessee. Subsequently, other statutory notices were issued and served to the assessee. Assessee furnished reply. The information was examined and it was observed that the assessee has deposited cash of Rs.30,12,000/- in the bank account maintained with Canara Bank. The source of cash deposit was asked and the assessee stated that a capital asset situated at No.20, 1st Cross, Rukmini Nagar, Nagasandra Post, Bangalore, was sold to one Mr. Venkataramana for a sale consideration of Rs.31 lakhs and the entire sale consideration was received in cash which was later on deposited into the bank account. However, on perusal of the sale deed dated 03.11.2016, it is seen that the property has been executed only for a sale value of Rs.17,56,000/- and an amount of Rs.16,71,000/- has been received in cash. Assessee later on filed an affidavit dated 05.08.2019 stating that the aforesaid property has been negotiated at a market value of Rs.30 lakhs. However, it was registered at a guidance value of Rs.17,56,000/- and claimed that the assessee has received Rs.30 lakhs as sale consideration and it has been offered as capital gain. However, this explanation of the assessee was not accepted observing that the assessee is unable to substantiate the source of cash deposit. Therefore, AO treated it as income under section 69A of the Act and applied section 115BBE of the Act and passed Assessment Order on 15.11.2019.
Aggrieved from the above Order, assessee filed appeal before the learned CIT(A). The learned CIT(A) also upheld the Order of the AO and dismissed the appeal of the assessee.
Aggrieved from the above Order, assessee filed appeal before the Tribunal.
The learned Counsel reiterated the submissions made before the lower authorities and submitted that during the demonetization period, assessee had deposited Rs.17,000/- on 17.11.2016 out of the earlier withdrawal and he referred to bank statement. The deposit was out of sale of the property. In this regard assessee filed affidavit before the AO. However, the AO has not accepted the same. If he had doubt, he could have examined with the buyer of the property and he also submitted that the assessee has offered the entire sale proceeds for capital gain and sale consideration which is evident from income tax return. In this regard, he referred to Paper Book Page No.19 and clearly mentioned that full value of sale consideration received of Rs.30 lakhs and value of property as per stamp verification authority of Rs.17,56,000/-. Assessee is a salaried person and he does not have any other source of income. The AO has accepted the capital gain income computed by the assessee. If the AO did not agree the full value of the consideration as declared by the assessee amounting to Rs.30 lakhs for capital gain purpose, the corresponding benefit of sale consideration shown by the assessee of Rs.30 lakhs should have been reduced but not done so. On one side he has accepted the sale consideration received of Rs. 30 lakhs and on the other side, the cash deposits out of sale proceeds i.e., the difference in value adopted by the stamp valuation authority only that part has been accepted which is completely incorrect decision of the AO. It is double taxation which is not permitted. The AO could have recalculated the capital gain disregarding the capital gain computation of the assessee.
The learned DR relied on the Order of the lower authorities and submitted that the sale consideration shown in the sale deed has to be accepted. In the sale deed, there is no recording of Rs.30 lakhs of sale consideration. Both the purchaser and seller have wrongly declared the value before the registering authority. Mere offering of capital gain is not sufficient to prove the cash deposits. Assessee has to prove with cogent material regarding source of cash deposits as observed by the AO.
Considering the rival submissions and on perusal of the entire material available on record and Orders of the authorities below, we note the sole reason for selection for limited scrutiny has to be examined regarding cash deposits in the bank accounts maintained with Canara Bank. From the submission of the assessee, we noted that during the impugned Assessment Year, the assessee has sold his property mentioned above at Rs.17,56,000/- as per the sale deed on 03.10.2016 and stamp registration authority has registered the said property at Rs.17,56,000/-. Assessee has submitted an affidavit stating that the property was sold at Rs.30 lakhs. The difference amount of negotiated price and registered value has been received in cash which was deposited by the assessee. On perusal of the bank statement, assessee has deposited cash on 01.10.2016 of Rs.26,20,000/- and further assessee has deposited cash on 03.10.2016 of Rs.2,35,000/-. We further noted that the assessee has computed capital gain and considered net consideration of Rs.30 lakhs which is shown in the income tax return and copy of income tax return is placed at Paper Book Page No.19. On going through the ITR filed by the assessee in the schedule of capital gain, it is noted that the assessee has shown full value of consideration of Rs.30 lakhs and value of property as per stamp valuation authority of Rs.17,56,000/-. The computation of capital gain by the assessee has not been disturbed by the AO. The AO has added Rs.13,41,000/- cash deposited as unexplained source of income. We noted from the bank statement that on 01.10.2016, assessee has deposited Rs.26,20,000/- which includes Rs.13,41,000/-. There is no separate deposit of Rs.13,41,000/- in assessee’s bank account and assessee is a salaried employee. Therefore, there is direct nexus of the cash received over and above the registered value. In view of this, it cannot be said that the amount received is unexplained. Relying on the affivadit and nexus between sale of property and cash deposit the amount received is out of sale of property to which the assessee has offered capital gain and Revenue has not disturbed the sale consideration shown by the assessee. Accordingly, the source is explained and the addition cannot be made under section 69A of the Act towards cash deposit made over and above the registered value.
In the result, appeal filed by the assessee is allowed.