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Facts
The assessee filed an income return for AY 2015-16. The AO reopened the assessment based on information about a cash deposit of Rs. 8,00,000 in the assessee's bank account. The AO added Rs. 5,00,000 to the assessee's income, disbelieving the explanation that it was a return of advance. The balance Rs. 3,00,000 was accepted as received from the assessee's wife.
Held
The Tribunal held that the explanation for the cash deposit of Rs. 5,00,000 as a return of advance for agricultural land, which was not materialized, was sufficiently supported by evidence like confirmation letters and the audited balance sheet. Therefore, the addition made by the AO was deleted.
Key Issues
Whether the addition of Rs. 5,00,000 as unexplained cash credit under Section 68 of the Income Tax Act is justified when the assessee provides a plausible explanation and supporting evidence for the source of funds.
Sections Cited
250, 147, 144B, 148, 68
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Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed at the instance of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 11.03.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2015-16.
2 -: 2. The solitary issue that is raised is whether the First Appellate Authority (FAA) is justified in confirming the addition made by the AO of Rs.5,00,000/- u/s.68 of the Act.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2015-16, the return of income was filed declaring income of Rs.3,37,940/-. Based on the information with the Department that assessee had deposited cash of Rs.8,00,000/- in his bank account, assessment was reopened by issuing notice u/s.148 of the Act. The assessment was completed vide order dated 12.03.2022 u/s.147 r.w.s.144B of the Act. In the said assessment order, the AO made addition of Rs.5,00,000/- being cash deposit for which the assessee had explained the source as return of advance which was disbelieved by the AO. As regards the source of cash deposit of Rs.3,00,000/-, the AO accepted the assessee’s submission that same was received from his wife.
Aggrieved by the assessment completed u/s.147 r.w.s.144B of the Act, the assessee filed appeal before the FAA. The FAA confirmed the view taken by the AO. The relevant finding of FAA read as follows:-
3 -: 5.3. The appellant in the grounds of appeal and written submissions has stated that he has given advance totaling to Rs.6,75,400/- to one Sri M.Pugazhenthi on different dates during the FY 2013-14 for purchase of property. However, since the deal was not materialized, the same was returned to the appellant during the FY 2014-15 which was deposited into his own account and an amount of Rs.5,00,000/- was gifted to his sister. The appellant filed confirmation letter from the person Sri M.Pugazhenthi wherein he stated that an amount of Rs.6,75,400/- was received and returned to the appellant. The appellant further claimed that the advance was shown in the Audited balance sheet at 31.03. 2014. I have perused the written submissions, confirmation letter, Balance Sheet and information available on record. The appellant has not furnished any details regarding the details of land purchase viz. Area, Location of the property, proposed value etc. except merely stating that he wished to buy land from the seller Sri M. Pugazhenthi. Further, there is no credible documentary evidence for the receipt of advance totaling to Rs.6,75,400/- except confirmation letter from the seller. There is no proper reason which was brought on record either during the assessment proceedings or at the appeal proceedings as to why the deal was not materialized. The proposed seller simply furnished a confirmation letter that he intends not to sell the property. The appellant claims that agreement is done orally and he has paid an amount of Rs 6,75,400/- in total during the FY 2013- 14 relevant to AY 2014-15. The appellant has not produced credible documentary evidence for the source of cash deposit of Rs.5,00,000/-. In view of the above, I am of the opinion that the AO has rightly disallowed the advance of Rs.5,00,000/- and added the same to the total income of the appellant and I decline to interfere into the same. Accordingly, the grounds raised by the appellant in this regard are dismissed and I uphold the addition made by the AO in the assessment order.”
5. Aggrieved by the order of the FAA, the assessee has preferred this appeal before the Tribunal. The assessee has filed a paper-book enclosing therein confirmation letter, Aadhaar card of late Shri Pugazhenthi, break-up details of advance given and repayment received, the audited balance sheet as on 31.03.2014, the receipt and payment account as on 31.03.2015 and the ITR
The Ld.DR supported the orders of AO and the FAA.
I have heard rival submissions and perused the material on record. The assessee had explained the cash deposit of Rs.5,00,000/- as amount received from Late Shri Pugazhenthi. It was stated by the assessee that a sum of Rs.6,75,400/- was given as advance for purchase of agricultural land in the previous year ending 31.03.2014 and since the sale did not materialize, advance amount was returned by the intended seller to the assessee. The confirmation issued by the intended seller reads as follows:- “I am hereby give my confirmation for received a sum of Rs.675400/- as advance for Agricultural Land proposed selling agreed orally to Mr.N. Maheswaran, S/o. Natarajan, D.No.2/2/1A, East Street, Walajanagaram Village and Post, Ariyalur District 621704 and returned the same advance of Rs.675400/- to Mr.N. Maheswaran since, my mother was not agreed to sell the lands due to family related issues. Therefore, the amount of Rs.6,75,400/- was received and returned to Mr.N. Maheswaran is hereby confirmed and true.”
Further, the seller also had filed a letter detailing the dates on which he had received the payment and when the advance 5 -: received was paid back to the assessee. The content of the letter is reproduced below:- “I am hereby give Break up details of Received and Payment back for Agricultural Land Advance Rs.675400/- received and confirmation letter was given on dt.03/01/2022 to Mr.N. Maheswaran, S/o. Natarajan, D.No.2/2/1A,, East Street, Walajanagaram Village and Post, Ariyalur District 621704. We are living same Village of location and well known each one of us, Since We are not executed a formal deed of agreement for the proposed sale of land. Therefore, We are both orally agreed the proposed sale of transaction on before our village key person evidences, most of the transactions of sale of land in our village is executed on without executing formal deed of agreement since our village is trust with our village key persons. Hence, Again I am hereby confirm the said transaction is true and genuine.
The break up details as follows:-
Advance Received date
10/03/2014 cash Rs. 75400-00 12/03/2014 cash Rs.100000-00 15/03/2014 cash Rs.100000-00 18/03/2014 cash Rs.100000-00 21/03/2014 cash Rs.100000-00 25/03/2014 cash Rs.100000-00 28/03/2014 cash Rs.100000-00 ---------------- Total Rs.675400-00
Advance Returned date cash Rs.675400-00 10/01/2015
The assessee has placed on record copy of Aadhaar card of Late Shri Pugazhenthi (the seller). On perusal of the audited balance sheet as on 31.03.2014, the amount advanced amounting to Rs.6,75,400/- has been disclosed as ‘other advances’ in the 6 -: current assets. From the facts on record, it is clear that assessee had advanced amount and same has been received back during the relevant assessment year. Since the source of amount of cash deposit amounting to Rs.5,00,000/- is explained satisfactorily, I delete the addition made by the AO amounting to Rs.5,00,000/- u/s.68 of the Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.