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Facts
The assessee deposited Rs. 32,18,500 in her bank account, claiming it was proceeds from her nephew's agricultural land sale and an additional Rs. 1,00,000 from her own cash. The AO treated the deposit as unexplained income under Section 69A and made an addition, as the assessee failed to provide satisfactory explanation and documentation.
Held
The Tribunal held that the Assessing Officer had not disputed the sale deeds and the relationship. A minor discrepancy in amounts did not negate the explanation provided by the assessee, especially since she proved the source of funds from her nephew. Therefore, no addition under Section 68 or 69A was warranted.
Key Issues
Whether the cash deposits in the assessee's bank account, claimed to be from her nephew's land sale, constitute unexplained income warranting addition under Section 69A, despite the assessee providing an affidavit and evidence of sale deeds.
Sections Cited
144, 153, 147, 148, 142(1), 69A, 2(24), 68
AI-generated summary — verify with the full judgment below
सुनवाई की तारीख/Date of Hearing : 02/04/2025 उदघोषणा की तारीख/Date of Pronouncement : 08/04/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/ NFAC, Delhi dt. 17/10/2023 pertaining to Assessment Year 2012-13. 2. In the present appeal Assessee has raised the following grounds:
Because, the AO under Section 144 of the Income Tax Act, 1961 has made his best assessment after passing of 21 months from the end of the assessment year in which the income was first assessable as mentioned under Section 153 of Income Tax Act, 1961, and therefore, all the proceedings are manifestly illegal, as the same are time-barred.
Because, as per Section 153 of Income Tax Act, 1961, no order of assessment under Section 147 of Income Tax Act, 1961 after the expiry of 9 months from the end of the financial year in which notice under Section 148 was served. 3. Because, the Learned CIT (Appeals) has not made any observation on the merits of the case, and the grounds raised
by the Petitioner were never even considered.
4. Because, the Learned CIT (Appeals) has upheld the order passed by the AO without giving any cogent reasons of its own. The only reason to upheld the Order is that the Petitioner/ Appellant has been unable to rebut the AO’s observation. The said reasoning is given without any consideration of the grounds of appeal raised by the Appellant. Therefore, the said order has been passed without any application of mind and hence, illegal.
5. Because, it has been stated that there is a difference of amount between the 2 sale deeds and the cash deposited in the account of appellant, which comes out to be exactly INR 11,000/-, and the said difference is rather negligible, and by no means create a shadow of doubt on the appellant. Therefore, the said finding is completely wrong.
6. Because, the only reason the Petitioner has even deposited the money in her account is due to the fact that her nephew, Mr. Harjinder Singh, who has been living with her since his childhood after the death of his father has sold an agricultural land and therefore, the money was handed over to the Appellant as Mr. Harjinder Singh did not have a bank account at that point. The said amount deposited in the account of Appellant on behalf of Mr. Harjinder Singh cannot be said as ‘income’ as defined under Section 2(24) of Income Tax Act, 1961.
3. Briefly the facts of the case are that the assessee deposited an aggregate cash amount of Rs. 32,18,500 in her savings bank account with HDFC Bank, Kurukshetra, during the Financial Year (FY) 2011-12 (Assessment Year (AY) 2012-13). The Assessing Officer (AO), upon detecting these deposits, issued statutory notices under Sections 148 and 142(1) of the Income Tax Act, 1961, seeking explanations for the source of the cash. The assessee failed to respond to these notices or file a return of income. Consequently, the AO completed the assessment ex parte under Section 144, treating the entire deposit as unexplained money under Section 69A of the Act and adding it to the assessee’s taxable income. 3.1 As per AO, despite multiple opportunities, the assessee did not furnish any explanation or documentary evidence to substantiate the source of the cash deposits. Notices under Sections 148, 142(1), and 144 were duly served, but the assessee remained non-compliant. In the absence of a valid explanation, the AO determined that the deposits constituted unexplained money under Section 69A. The AO also noted discrepancies in the additional evidence submitted during appellate proceedings, including mismatches between the sale deed amounts of Rs. 32,29,500/- and the cash deposited Rs. 32,18,500/-. It was also submitted that there was no proof to support the claims except for a signed statement. Additionally, the unexplained withdrawal of Rs. 32,15,000 from the account within a month of the deposits raised suspicions.
4. Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). The CIT(A) admitted the additional evidence under Rule 46A but concurred with the AO’s findings. It highlighted that the sale deeds pertained to a third party (the nephew), and the affidavit alone was insufficient to establish the legitimacy of the source. The CIT(A) emphasized that the nephew could have opened his own bank account for safety, rendering the assessee’s claim implausible. Further, the swift withdrawal of funds post-deposit lacked justification. The CIT(A) upheld the addition under Section 69A, and dismissed the appeal of the assessee.
5. Feeling aggrieved by the order of the Ld CIT(A) the assessee is in appeal before us.
6. During the course of hearing, the assessee contended that the cash deposits originated from her nephew, Harjinder Singh, who sold agricultural land for Rs. 31,29,500 through two sale deeds and entrusted her with the proceeds for safekeeping. She claimed to have added Rs. 1,00,000/- from her existing cash holdings, depositing the total Rs. 32,18,500. An affidavit from Harjinder Singh affirmed the source of funds and their custodial transfer to the assessee. The assessee argued that the amount was not taxable as it belonged to her nephew and was held in trust. She also cited her agricultural background and lack of taxable income to justify the cash holdings.
7. Per contra, the learned Departmental Representative (Ld. DR) relied on the orders of the lower authorities. The Ld. DR submitted that the assessee’s non- compliance during the assessment proceedings indicated a lack of bona fide explanation. It was further stated that the affidavit submitted by the assessee was not corroborated by any independent evidence, such as bank records of the nephew or proof of custodianship. The Ld. DR also pointed out that the mismatch between the sale deed amount of Rs. 32,29,500/- and the deposited amount of Rs. 32,18,500/- remained unexplained. Additionally, the immediate withdrawal of nearly the entire deposit amounting to Rs. 32,15,000/- suggested the possibility of unaccounted transactions. The Ld. DR emphasized that the nephew’s failure to open a bank account, despite having no restrictions, further weakened the assessee’s claim.
We have heard the rival contentions and perused the material available on record. The Ld. CIT(A), had called for the remand report from the Ld. Assessing Officer and in the remand report he had mentioned in paragraph 4 and 5 as under :
On the basis of information available/submissions of the assessee, details of cash deposited/sale deeds are as under:
Date of transactions Amount of Deposit of Sale Deed amount Sale deed executed on cash in bank account 11/01/2012 14,93,500/- 13,95,000/- 10/01/2012 14/01/2012 17,25,000 17,34,500//- 100000 (Cash n hand 13/01/2012 Total 31,18,500 32,29,500 On perusal & analysing of her submissions and above tabulated data, following observations have been noticed: i) Sale deeds produced related to another/third person. Total Amount of Cash Deposits do not match with sale deed amounts plus cash in hand amount of Rs.1,00,000/- with assessee as claimed. The assessee is having large amount as cash in hand even though assessee do not have any source of income. Also, no documentary evidence has been produced by the assessee w.r.t. custodian of her legal guardian Mr. Harjinder Singh except merely copy of affidavit. ii) There was no restrictions to open bank account during the period and Mr. Harjinder Singh, nephew of assessee was very well able to open bank account in his name to deposit large cash received from sale proceeds for safety reasons. iii) The assessee has paid amounts of Rs.10,00,000/-, Rs.5,50,000/-, Rs.5,00,000/- & Rs.11,65,000/- totalling to Rs.32,15,000/- equal to above cash deposited through cheques dated 19.01.2012, 31.01.2012, 11.02.2012 & 23.02.2012 respectively within almost one month only but no purpose/reason/explanation/comment has been submitted by the assessee. iv) The addition was made due to the assessee’s failure to furnish the source of cash deposits of Rs.32,18,500/- as the assessee has not made any single compliance to notices issued during assessment proceedings, due to unavoidable circumstances as claimed, but appeal against the assessment order has been filed by her.
Now, the assessee pleads by submitting above submissions. But, in view of facts/observations discussed above, it is requested that the application of the assessee under Rule 46A for considering additional evidences and the appeal of the assessee may be decided on merits accordingly.
From the perusal of the record, it is evident that the Assessing Officer has not disputed the execution of the sale deeds by Shri Harjinder Singh, who is the nephew of the assessee. The only objection raised was a minor discrepancy between the sale consideration received and the amount deposited in the bank. It was also observed that although Shri Harjinder Singh could have opened his own bank account, this alone cannot negate the explanation given by the assessee. In our considered opinion, once the assessee was able to prove the source of the funds received from her nephew and their subsequent deposit in her bank account, no addition under Section 68 or Section 69A of the Income-tax Act is warranted. The Revenue has not denied the relationship between the assessee and the seller of the agricultural land nor the fact of sale and cash receipt. As the assessee has explained the source of deposit with supporting evidence, the addition made by the AO is unsustainable. Accordingly, the appeal of the assessee is allowed, and the addition of Rs. 32,18,500/- is deleted.
In the result, appeal of the Assessee is allowed.