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Facts
The assessee, involved in construction of flats, received cash advances of Rs. 19 lakhs from customers. The Assessing Officer (AO) added this amount as unexplained income under Section 68 of the Income Tax Act. The assessee had provided sale deeds and customer confirmations detailing these cash receipts.
Held
The Tribunal held that the assessee had sufficiently explained the source of the Rs. 19 lakhs cash deposit as advances received from customers for the sale of flats. These transactions were corroborated by registered sale deeds and admitted before the Registering Authority, and were uncontroverted by the Revenue.
Key Issues
Whether the cash advances received by the assessee from customers for booking of flats are to be treated as unexplained income under Section 68 of the Income Tax Act, or if they are sufficiently explained by documentary evidence.
Sections Cited
68, 147, 148, 143(1), 142(1), 44AD
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.MANISH BORAD
ORDER
PER DR. MANISH BORAD, AM:
This is an appeal filed by the assessee against the order of ld.Commissioner of Income Tax(Appeals)[NFAC] for [A] Assessment Year 2011-12 dated 12.02.2024 passed u/sec.250 of the Income tax Act, 1961. The Assessee has raised the following grounds of appeal : “1] The learned CIT(A) erred in confirming the addition u/s 68 by holding that the cash deposits of Rs.19,00,000 made in bank account during A.Y.2011 12 represented undisclosed income of the appellant without appreciating that the said addition was not justified on facts and in law. 2] The learned CIT(A) failed to appreciate that the source of cash deposits of Rs.19,00,000 was duly explained to be out of advances received from customers for booking of flat and this fact was also stated in the registered deeds and confirmations of customers filed by the appellant and therefore, the addition u/s 68 made only on the basis of suspicion and surmises was not justified. 3] The learned CIT(A) ought to have appreciated that the advances received from customers which were taxed as undisclosed income u/s 68, were offered to tax as part of sale consideration on transfer of flats in the subsequent years and therefore, there was no reason to tax the said advances as income of the appellant in the year of receipt. 4] The learned CIT(A) further erred in confirming the adhoc addition of Rs.75,000 made by the A.O. by not accepting the opening cash in hand to the extent of Rs.75,000 out of total opening cash of Rs.3,55,247 without appreciating that the appellant was engaged in bakery business since past 16 years and hence, there was no reason to make adhoc addition of Rs.75,000 without giving any basis for such estimation.
5] Without prejudice to the above grounds, the appellant submits that the notice u/s 148 issued in the instant case itself is bad in law and hence, the asst. order u/s 147 may be declared as null and void in law. 6] The appellant craves, leave to add, alter, amend and delete any of the above grounds of appeal
.”
2. At the outset of hearing before us, ld.Counsel for the Assessee did not press Ground of appeal numbers 4 and 5, therefore, the said grounds are dismissed as not pressed.
2.1 The effective issue remains for consideration raised by the assessee are from Ground No.1, 2 and 3 which are against the addition under section 68 of the Act for the unexplained cash deposits of Rs.19 lakhs.
Facts in brief : 3. The Assessee is an Individual and did not file any Return of Income for the A.Y.2011-12. Based on the information available with the Revenue regarding the cash deposit of Rs.32,16,000/- in [A] the bank account of the assessee held with The Mahanagar Co-op Bank Ltd., Nashik, valid notice under section 148 of the Act was duly served along with notice 143(1) r.w.ws 142(1) of the Act. In compliance, the Assessee furnished return of income declaring income of Rs.6,01,970/-.
3.1 During the course of assessment proceedings, it was said that assessee is involved in the activity of land dealing, commission income and bakery business and income has been offered under section 44AD of the Act. When the assessee was asked to explain the source of cash Rs.32,16,000/-, a cash flow statement and statement of affairs was provided. On perusal of the said details indicated that a sum of Rs.19 lakhs was claimed to have been received as cash advances from customers for booking/purchase of flats. However, the deeds of registration were entered into during F.Y.2012-13 and onwards. The claim of [A] the assessee that Rs.19 lakhs was received as advance from customers was not accepted by the Assessing Officer resulting into the addition of Rs.19 lakhs under section 68 of the Act. Along with other addition of Rs.75,000/-(which has not been challenged before us income assessed at Rs.25,76,970/-.
Aggrieved by the order of the Assessing Officer, Assessee filed appeal before the ld.CIT(A). The ld.CIT(A) dismissed the appeal of the assessee.
Aggrieved by the order of the ld.CIT(A), Assessee filed appeal before this Tribunal challenging the addition of Rs.19 lakhs made by the Assessing Officer under section 68 of the Act.
Ld.Counsel for the assessee submitted that assessee is into the business of construction of flats. The project commenced during the year under consideration and assessee received advances from his customers. When the construction of flat was completed, they were handed over to the customers from time to time and formal registration sale deeds were entered into. He also referring to the paper book containing 79 pages referring to the confirmation letters from the customers from whom advance of Rs.19 lakhs was received along with their PAN numbers, Bank statements and also the registered sale deeds, wherein the transaction of receiving cash advance from the customers have been mentioned. All these documents have been placed before the ld.CIT(A) as well as Assessing Officer.
On the other hand, ld.DR for the Revenue relied on the orders of Lower Authorities.
I have heard rival contentions and perused the records placed before me. The only issue for my consideration is whether the ld.CIT(A) was justified in confirming action of the Assessing Officer making addition for unexplained cash deposit of Rs.19 lakhs. On perusal of the details, I find that the assessee started construction business during the year under consideration and planned for construction of flats. At the time of booking, the advances were received in cash from customers for booking the flats. The alleged sum of Rs.19 lakhs has been received from 11 parties. Even though the assessee furnished the PAN numbers of all the customers before the AO, no further enquiry was carried out. The assessee is also furnished the copies of registered sale deeds wherein the details of payment included the payment received in cash. For instance, one of the customers namely Bharat Kumbharan. PAN:APYPK5821J the flat has been sold for a total consideration of Rs.11,92,000/-. In the details of payment appearing in the sale deed at paper book page 8, the sum included the cash of Rs.1,50,000/- received from buyer,. There are other payments received through banking channel. Another party Prajith Nair, PAN:AIYPN2761P and the consideration for sale of flat of Rs.13 lakhs out of which Rs.50 thousand has been received in cash in the year under appeal and the sum is appearing in the registered deed placed at page of Paper book 15. 8.1 I have gone through the records and find that for all the remaining 9 parties similar type of transactions of cash advance have been carried on along with payment of cheques and cash has also been received. So, the source of alleged cash deposit is advance received from the customers who have purchased the flats from assessee and have been admitted before the Registering Authority. All these details stands uncontroverted by the Revenue Authorities. I am therefore of the considered view that since the assessee has successfully explained the source of alleged cash deposit of Rs.19 lakhs which is from receipts of customers towards advances for sale of flats, therefore, the impugned addition under section 68 of the Act is uncalled-for. Findings of the ld.CIT(A) is reversed and addition of Rs.19 lakhs stands deleted. Ground No.1, 2 and 3 raised by the Assessee are allowed.