SMT KUSHALAPPA SAVITRI ,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6(3)(1), BANGALORE

There is a delay of 88 days in filing this appeal. The assessee has filed application for condonation of delay along with the Affidavit. The assessee has submitted the reasons for the above delay are that she received the appellate order dated 21.11.2017 on 24.2.2018 and an application u/s. 154 was filed on 19.3.2018 which was disposed of on 18.6.2018 and served on her on 22.6.2018. The application u/s. 154 was rejected by the CIT(Appeals). The assessee filed appeal before the

We have heard both the parties and perused the material on record on the condonation of delay in filing the appeal before the Tribunal. In our opinion, the assessee was pursuing alternative remedy by way of application u/s. 154 of the Act before the CIT(Appeals). The reasons put forth by the assessee are considered. We are of the view that there was sufficient and reasonable cause for the delay of 88 days in filing the appeal. The Hon’ble Supreme Court judgment in the case of Collector of Land Acquisition v. Mst. Katiji, 167 ITR 471 (SC) wherein it was held as under:- (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3)"Every day’s delay must be explained" does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational, common sense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to

The assessee is in appeal before us with regard to sustaining addition u/s. 68 of the Act as follows:- (i) Unexplained cash deposit 1,00,00,000 (ii) Advance received received from Shri Venkatesh 75,00,000 Gowda. (iii) Advance received from Shri Rajanna 50,00,000 (iv) Cash Deposit 28,00,000 Total 2,53,00,000

The facts of the case are that the assessee being an Individual has e-filed her Return of Income on 05-08-2013 declaring income of Rs. 23,47,900 for the A.Y 2013-14. The AO completed scrutiny assessment on 30.3.2016 determining total income at Rs.2,76,47,900 as against declared income of Rs.23,47,900 by making the addition of Rs.2,53,00,000 as follows:- 1 Unexplained deposit on 13.7.2012. 1,00,00,000 2 Advance received against sale of agricultural lands 75,00,000 belonging to the husband to Venkatesh Gowda. 3 Advance received against sale of agricultural lands belonging to the husband to Rajanna 50,00,000 4 Cash Deposit 28,00,000 Total 2,53,00,000

On appeal, the CIT(Appeals) confirmed the same. Against this, the assessee is in appeal before us.

The AO made an addition of Rs.1 crore observing that Assessee has failed to discharge the onus of proving the Cash Credit in the Bank Account to the extent and made addition u/s. 68 of the Act.

Before the CIT(Appeals), the assessee that she has not made a deposit of Rs. 1,00,00,000 on 13-07-2012 as alleged by the AO. The AO has not mentioned the name of the Bank, its Branch and name of the account where the amount is alleged to have been deposited. The assessee has maintained her Bank Account bearing No. 912010016161631 with Axis Bank Ltd., No. 21, 80 Feet Road, 4th Block, Koramangala, Bangalore - 560085. In the said Bank Account no entry is found as regards alleged Cash Deposit of Rs. 1,00,00,000 on 13-07-2012.

It was further submitted that assessee’s husband, Sri. Jagadish, has maintained a Joint Bank Account along with the assessee bearing No. 912010034699138 with Axis Bank Ltd. and even in the said Joint Account no Cash deposit was found on 13-07-2012. On the contrary in the said Joint Account, a withdrawal entry was found on 13-07-2012 amounting to Rs. 1,00,00,000. Therefore the. AO has with a wrong perception stated that the assessee has made a Cash Deposit of Rs. 1,00,00,000 on 13-07-2012

Before us, the ld. AR submitted that the AO made an addition of Rs.1 crore on the ground that assessee has deposited a Cheque marked as CHQ/3564/Savitri which was later converted into a fixed deposit. The AO sought for explanation of the source of deposit. The assessee submitted that the cheque CHQ/3564/Savitri stated to be deposited is not a fact as per the Bank account since the assessee has not deposited any Cheque bearing No.3564 amounting to Rs.1 crore on 13.7.2012. The AO further held that on 13.12.2012 there was a withdrawal of Rs.1 crore by the husband of assessee, the source and the manner and need for the said withdrawal was not established and not reconciled by the assessee and therefore addition was made to that extent as unexplained cash credits u/s. 68 of the Act.

The ld. AR submitted that the AO has completely mistaken the facts and the bank account. It is evident from the bank account that the assessee has issued a Cheque No.3564 dated 13.7.2012 to her husband, Shri Jagadish for a sum of Rs.1 crore and the same was mistaken by the AO as a cheque deposited on 13.7.2012 which is not a fact on record. The AO has mistaken the withdrawal entry by Cheque No.3564 on 13.7.2012 by Shri Jagadish, husband of the assessee, as deposit. Therefore the addition made of Rs. 1,00,00,000 being the withdrawal by the Husband of the assessee on 13-07-2012 vide Cheque No. 3564 referred in the Assessment Order, is not justifiable in law since the withdrawal of the amount from the Bank cannot be construed as a deposit as mistaken by the AO. Hence the addition of Rs. 1.00,00,000 being the withdrawal cannot be held as income of the assessee u/s. 68 of the Act. The provision of section 68 of the Act is not applicable to the assessee since she has not

On the other hand, the ld. DR submitted that in terms of applicability of section 68 of the Act in the instant case, merely quoting of a wrong section in the assessment order does not invalidate the assessment. To sustain the addition u/s. 68, there is no condition mentioned in section 68 that the assessee shall maintain the books of account. He submitted that if the argument of the ld. AR is accepted, it would mean that the cash deposits in the bank account is actually a sum credited in the books of the bank and that the bank should offer explanation for the sums so credited. In such a situation, the banks would be taxed for unexplained cash credits which is an absurd consequence. The ld. DR relied on the following decisions:- - CIT v. Bhaichand N. Gandhi [1983] 141 ITR 67 (Bom) - CIT v. Anand Ram Raitani [1997] 223 ITR 544 (Gauhati)

We have heard both the parties and perused the material on record. The AO made the addition on the reason that the assessee has deposited cheque bearing No.3564 on 13.7.2012. We have carefully gone through this entry in the bank statement on this date, which shows the withdrawal of Rs.1 crore vide Cheque No.3564 on 13.7.2012. However, the AO has mistaken it as a deposit of Rs.1 crore. Section 68 cannot be applied for withdrawal made from the bank account. It is not a case of unexplained deposit so as to sustain the addition u/s. 68 of the Act. Accordingly, the addition of Rs.1 crore is deleted.

The AO in the Assessment Order has made an addition of Rs. 1,25,00,000 consisting of an amount of Rs. 75,00,000 and Rs. 50,00,000 forming part of total addition of Rs. 2,53,00,000.

Before the CIT(Appeals) the assessee has submitted that her Husband, Sri. Jagadish has been owning Agricultural Lands measuring 5 Acres 4 Guntas at Maragondanahalli Village Sy. No. 25/P1, Kundana Hobli, Devanahalli Taluk, Bangalore Rural District. Shri Jagadish has entered into a Sale Agreement dtd. 10-07-2012 with Sri. R. Venkatesh Gowda in respect of the aforesaid land for a consideration of Rs. 2,04,00,000 against which an advance of Sale Consideration was received amounting to Rs. 75,00,000 and the same amount was utilised for depositing into the assessee’s Bank Account.

Similarly the spouse of the assessee, Shri Jagadish has been owning agricultural lands measuring 1 Acre 38 Guntas in Sy. No. 24, situated at Maragondanahalli Village, Kundana Hobli, Devanahalli Taluk, Bangalore Rural District and he entered into a Sale Agreement dated 10.07.2012 with Sri. R. Rajanna in respect of the aforesaid land for a consideration of Rs. 1,36,50,000 against which an advance of Sale Consideration was received amounting to Rs.50,00,000 and the same amount was utilised for depositing into the assessee’s Bank Account.

Thus the amount of advance received from Sri. Venkata Gowda and Sri. Rajanna amounting to Rs. 1,25,00,000 (75,00,000 + 50,00,000) by virtue of Sale Agreements acknowledged by the spouse of the Appellant was deposited into the Bank of the assessee. The relevant copies of the sale agreements were produced before the AO in the course of the Assessment Proceedings. However, the AO has not appreciated and accepted the sale Agreements mainly on the ground that the creditworthiness of the Purchasers Sri. Venkata Gowda and Sri. Rajanna was not established.

In this regard, it was submitted that the assessee has not received the amount directly from the Intending Buyers Sri. Venkata Gowda and Sri. Rajanna, but the amount was received by her spouse and the same was utilised for Bank Deposits. The AO has not caused any enquires in this regard to examine the Spouse of the assessee, as to whether such lands owned by him were really agreed to be sold and whether the advance of Rs. 1,25,00,000 was paid by the intending buyer to him. The ld. AR submitted that the source of Cash Deposits was from the spouse who received as advances in terms of the Sale Agreements entered into him with the buyers of the lands. Therefore, the AO was not justified in expecting the assessee to prove the source of source.

It was further submitted that the AO has mainly relied upon the Copies of the Bank Account where the Cash Credit was found and as per the settled position of law, he was not justified in treating the Bank Deposits as income of the assessee u/s. 68, since the Bank Deposits per se do not constitute income chargeable to tax u/s. 68 of the Act and hence the addition so made is liable to be deleted.

The ld. AR submitted that the AO has made an addition of Rs.1,25,00,000 being the amount of advance received by the husband of assessee, Sri. Venkatesh Gowda and Sri Rajanna amounting to Rs. 75,00,000 and Rs. 50,00,000 respectively against the Sale of Agricultural lands. The assessee submitted before the AO, the Confirmation Letters and the Sale Agreement Copies of the following persons:- i. Sri Venkatesh Gowda Rs.75,00,000 ii. Sri Rajanna Rs.50,00,000 iii. Sri N. Gopalaiah Rs.50,00,000 22. The assessee submitted that the agricultural lands owned by her husband Sri Jagadish were agreed to be sold in favour of the aforesaid three purchasers who have advanced a sum as stated above. The AO has accepted the advance of Sale Consideration of Rs. 50,00,000 relating to Sri. N. Gopalaiah and rejected the confirmation letters and Sale Agreements related to Sri. Venkatesh Gowda and Sri. Rajanna on the ground of inadequate creditworthiness as discussed in para 6 of the Assessment Order. In this regard, it is submitted that the AO was not justified to hold that the "mere Sale Agreements do not throw any light on their creditworthiness" relating to Sri. Venkatesh Gowda and Sri. Rajanna, since the AO has not examined neither the husband of the Appellant nor the purchasers Sri. Venkatesh Gowda and Sri. Rajanna. The AO without examination of the purchasers and the Appellant's husband who has received the advance sale consideration which was paid to the assessee

The ld. DR relied on the orders of the lower authorities.

We have heard both the parties and perused the material on record. The assessee has produced sale agreement date 10.7.2012 entered into by Mr. T.C. Jagadish Gowda in favour of Mr. R. Venkate Gowda and received an advance of Rs.75 lakhs. Copy of this sale agreement is placed at pages 39 to 43 of PB (Kannada & English versions). Copy of Confirmation letter from Mr. Venkate Gowda is placed at pages 44 & 45 of PB. The assessee explained the same before the lower authorities which was rejected on the ground that Venkate Gowda is an agriculturist having no sources of income, he was not assessed to income tax and did not have PAN. In other words, the AO doubted the creditworthiness of Venkate Gowda. In our opinion, the provisions of section 68 of the Act gives a statutory recognition to the principle that cash deposits which are not satisfactorily explained may be assessed as income of the assessee. This provision empowers the AO to assess income regarding cash credit. If the AO is satisfied with regard to genuineness, creditworthiness and identity of the parties, he may not treat it as income of the assessee. In other words, he has right to treat it as income of the assessee under the head ‘income from other sources’. The satisfaction of the AO is the basis for making addition u/s. 68 of the Act. The satisfaction must be derived from the

As discussed above, in the case of Rajanna also, the assessee has filed the agreement entered by the assessee’s husband, Mr. Jagadish Gowda in favour of Mr. Rajanna which is placed at pages 31 to 35 of the PB and confirmation letter and affidavit at pages 36 & 38 of the PB. These evidence show that the assessee’s husband, Jagadish Gowda has received the advance of Rs.50 lakhs from Mr. Rajanna towards the sale of land. This advance cannot be considered as unexplained credit in the hands of the assessee. The source is explained as received from assessee’s husband, which in turn was received from the purchaser, Venkate Gowda. Further the case law relied on by the ld. AR in the case of Subbaiah Ramanathan v. ITO, ITA Nos.2314 & 2315/Mds/2013 dated 19.6.2015 supports the case of the assessee wherein it was held as under:- “6. We have heard both the parties and perused the material on record. According to section 68 of the Income Tax Act, the assessees ought to have proved nature and source of credits appearing in his/her books of accounts. In other words, the assessee has to prove not only identity of the creditors but also to prove that creditors had the requisite capacity to advance the loan and also prove the genuineness of the transaction. In the present case, according to the lower authorities the assessee has not discharged the burden cast upon them, even after filing

In the present case, the AO wants the assessee to prove the source of source of credits which is not required u/s. 68 in the case of these kind of credits. Primarily the assessee has established the source of credit that she has received it from her husband and also brought on record that assessee’s husband is having vast agricultural lands. The owning of agricultural lands by assessee’s spouse is not at all doubted by the AO. It is also brought on record by the assessee that she is also owning agricultural land and entered into sale deed in favour of M/s. Dreamz Infra India Pvt. Ltd. on 05.9.2012 in respect of converted property bearing Survey No.121/3 (Old No.121/1) measuring 1 acre 10 guntas at Boganahali Village, Varthur Hobli, Bangalore East Taluk for a consideration of Rs.3,20,00,000. The genuineness of assessee’s spouse entered into sale agreements with various parties cannot be doubted without any material in hand.

Further provision to section 68 inserted w.e.f. 1.4.2013 requires the assessee to prove the source of source. This proviso shall apply to funds collected by a closely held company from resident shareholders. Hence the same will not be applicable to the assessee as she is an individual.

Being so, in our opinion, the assessee discharged the burden cast upon her to explain the identity of parties, capacity and genuineness of the transaction. Accordingly, this addition is deleted.

The AO observed that a sum of Rs. 28,00,000 being cash deposits remained unexplained and un-reconciled and therefore considered it as income of the assessee. The CIT(Appeals) confirmed the same.

The ld. AR contended that the AO has stated that a sum of Rs.28,00,000 remained unexplained as un-reconciled without any basis. The AO has not mentioned as to how a sum of Rs. 28,00,000 remained unexplained and un-reconciled. He has not brought on record as to the material evidence with reference to which the explanation and reconciliation was sought for. Without doing so, he came to the conclusion on assumption that a sum of Rs. 28,00,000 being the alleged cash deposits remained unexplained and un-reconciled. Therefore the AO was not justified to hold that the sum of Rs. 28,00,000 represented income of the assessee merely by saying that it remained unexplained and un- reconciled. It was submitted that the assessee’s spouse received Rs.50 lakhs as an advance from N. Gopalaiah the intending buyer of the agricultural land and this fact has been accepted by the AO. The assessee utilized an amount of Rs.28 lakhs out of this advance to deposit into the bank account and the deposit of Rs.28 lakhs remains explained and no addition is warranted in this regard.

The ld. DR supported the order of the revenue authorities.

After considering the rival submissions, the assessee has explained that Rs.28 lakhs has been deposited into the bank account out of the advance of Rs.50 lakhs received from N. Gopalaiah. The AO accepted the advance of Rs.50 lakhs received from N. Gopalaiah, but he has doubted the deposit of Rs.28 lakhs out of advance of Rs.50 lakhs into the assessee’s bank account. We find that Rs.50 lakhs received from N.

Since we have deleted all the additions made u/s. 68 of the Act, we refrain from going into other grounds of appeal argued by the assessee which are only academic in nature.

In the result, the appeal by the assessee is allowed.

Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order