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Facts
The Revenue appealed an order by the CIT(A) that deleted an addition made by the AO. The AO had added Rs. 2,46,38,500/- as unexplained cash deposits in the assessee's saving bank account. The assessee claimed the cash originated from the sale of agricultural land by his mother and aunt, which was temporarily deposited in his account.
Held
The Tribunal found that the assessee provided sufficient evidence to explain the source of the cash deposits as proceeds from the sale of agricultural land. The lands sold were not capital assets under Section 2(14) and thus the sale proceeds were not taxable. The CIT(A) had correctly appreciated the facts and allowed the appeal.
Key Issues
Whether the cash deposits made by the assessee were unexplained money, or if they were explained by the sale of agricultural land owned by relatives.
Sections Cited
68, 148, 143(2), 142(1), 2(14)
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
the order of the ld. Commissioner of Income Tax (Appeals)
NFAC [in short ‘the CIT (A)’] dated 18.03.2024 passed for assessment year 2014-15. The Revenue has taken five grounds of appeal however, its grievance revolves around a single issue namely ld. CIT(A) has erred in deleting the A.Y.2014-15 2 addition of Rs.2,46,38,500/- which was added by the AO with the aid of Section 68 of the Income Tax Act.
The brief facts of the case are that assessee did not file the return of income. An information came to the AO that assessee has made a cash deposit of Rs.2,46,75,200/- in his Saving Bank Account, therefore, AO has recorded reasons and issued notice under Section 148 of the Income Tax Act.
In response to that, assessee has filed return of income on 25.12.2021 declaring total income of Rs.2,12,120/- from salary and Rs.24,385/- from other sources. The AO has issued notice under Section 143(2) as well as 142(1). The ld. AO sought explanation of the assessee about the source of deposits in the Saving Bank Account. It was submitted by the assessee that his grandfather has two sons namely, Shri Tarlochan Singh and Shri Bahadur Singh. His mother i.e. wife of Shri Bahadur Singh and aunt (wife of uncle Shri Tarlochan Singh) had sold agriculture land which does not fall within the ambit of capital asset under Section 2(14) of the Income Tax Act because the lands were situated beyond 8 kms. of the municipal limits. The sale proceeds were A.Y.2014-15 3 handed over to the assessee and he temporarily deposited the amount in his account. The sale proceeds were returned to both these ladies in toto. For buttressing this contention, assessee has filed relevant documents namely Agreement to Sell, Sale Deed etc. The AO was not satisfied with the explanation of the assessee and he made the additions. He further made additions which was otherwise deposited by the assessee out of agriculture income.
Dissatisfied with the order of the AO, assessee carried the matter in appeal before the CIT(A). He filed written submissions which has been reproduced by the ld. CIT(A) from page 4 to 27 of the impugned order. The ld. CIT(A) thereafter allowed the appeal of the assessee and recorded following findings : “On perusal of the bank statements, it is evident that the appellant has deposited the said amount of Rs. 2,46,38,500/- on 24/12/2013 and earned interests of Rs. 24,354/- and further transferred Rs. 1,20,00,000/- and Rs. 1,26,62,879/- to the bank accounts of Mrs. Paramjeet Kaur and Mrs. Chetan Kaur. The appellant further submits that agricultural lands admeasuring 38 Kanal 7 marla was sold against the sale consideration of Rs. 2,73,00625/- (Rs. 2,41,50,000/- + Rs. 81,50,625/-) and total amount received as on 21/12/2013 of Rs. 2,41,50,000/-. This advance amount and the agricultural income of Rs. 4,88,500/- totaling of Rs. 2,46,35,800/- was deposited in his bank account. It is further submitted that Rs. 24,354/- was earned as accumulated interest and Rs. 25/- miscellaneous income which totaling of Rs. 2,46,62,879/- (Rs. 2,41,50,000/- + Rs. 4,88,500/- + Rs. 24,354/- + Rs. 25/-) was redeposited to the bank account of Smt Paramjeet Kaur (A/c No.
ITA No.607/CHD/2024 A.Y.2014-15 4
914010000008513 of Rs. 1,20,00,000/-) and Smt Chetan Kaur (A/c No 914010000008649 of Rs. 1,26,62,879/-). This very fact is also supported by the evidences available on record. 5.7 It appears from the above stated facts that the AO has treated the said cash deposits made as unexplained money despite the explanation made by the appellant with the supporting evidences which clearly explains the source of the cash deposited in the bank account. The appellant explains that the cash was generated from the sale proceeds and as the owner of the same were not having any bank accounts and also to safeguard such a huge sum in some other's account has not been barred by the law if it is explained with supporting evidences and the appellant succeeds in this regard. Furthermore it is seen that the AO issued Show Cause Notice cited supra digitally signed at 14:33:35 1ST on 22/03/2022 and expected appellant's response by 23:59 hours of 23/03/2022, which is nothing but injustice caused to the appellant. Even in the remand report, the AO has submitted the report without conducting any inquiry and termed the explanation as a concocted. Moreover, the evidences submitted by the appellant corroborate that cash / sale consideration stated in the Bayana document has arisen out of the sale of agricultural land owned by the relatives of the appellant. The cash deposited in account of the appellant is in toto transferred immediately to the account of the relatives. This clearly established that cash is transferred to real owners of it & if any exempt income / taxable income is to arise, will arise in the hands of the beneficiaries or the real recipients of cash. It is also proved that cash has come out of the sale of agricultural land, which is not taxable. Though the cash amount as per bayana is much more than the sale deed same is from the sale of agricultural land and the rightful owners are the relatives of the appellant and hence if any incidence of taxation in view of difference in bayana amount and sale deed amount will lie in hands of the relatives and not in the hands of appellant. The AO has not established that cash arisen is out of any other source than that of sale of agricultural land and hence any excess cash to sale deed would also be out of sale of agriculture land and is required to be treated to be exempt i.e. proceeds out of sale of agricultural land. 5.8 Considering the entirety of the facts and explanations made by the appellant alongwith the evidences available on record, I opine that the appellant has succeeded in explaining and establishing the source of the cash deposits made in his bank account. Therefore, the addition made by the AO is deleted and the grounds of appeal are allowed.
6. In Ground No 3, the appellant crave the right of addition/subtraction of any ground of appeal during the assessment proceeding, however, the appellant has not exercised any of such options. Therefore, this ground is treated as dismissed ground of appeal.
ITA No.607/CHD/2024 A.Y.2014-15 5
In the result, the appeal is treated as partly allowed.”
With the assistance of ld. Representative, we have gone through the record carefully. We find that the agriculture details of landholding possessed by the mother and aunt of the assessee as well as their date of sales including the rates have duly been disclosed by the assessee and taken note by the ld. First Appellate Authority on page No. 24 to 26 of the impugned order. Thereafter, it was demonstrated before the ld. First Appellate Authority that out of sale proceeds, both the ladies have purchased 13 acres 7 marla. It was submitted that basically it is an agriculturist family who are engaged in agriculture activity only. They sold certain parcel of land and purchased the land after some time. But both the ladies were not holding bank account when transactions have been entered into. Thus, for a temporary period, the amount was given to the assessee which was in a fiduciary capacity as a ‘amanat’. One of the vendor is the mother of the assessee and the other one is aunt of the assessee. He has returned money to both of them. Sale proceed was not taxable under the Income Tax Act because it was received on sale of agriculture land which does not fall within the ambit A.Y.2014-15 6 of ‘capital asset’ provided under Section 2(14) of the Income Tax Act. Thus, we are of the view that ld. First Appellate Authority has appreciated the controversy in right perspective and no interference is called for. Accordingly, we do not find any merit in this appeal. It is dismissed.
In the result, appeal is dismissed.
Order pronounced on 10.03.2025.