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Facts
The assessee, an individual and Managing Director of a company, deposited INR 25 lakhs in his bank account, claiming it was an advance for the sale of the company's immovable property, but the AO and CIT(A) treated it as unexplained money under Section 69B due to insufficient documentation. Separately, the assessee claimed INR 3.99 crore from the sale of 41.47 acres of land as exempt agricultural income, which the AO and CIT(A) deemed business income given the assessee's history in real estate dealings.
Held
For the INR 25 lakh cash deposit, the tribunal restored the issue to the AO for *de novo* adjudication, noting the assessee was not given adequate opportunity to furnish required documents or produce persons. Regarding the income from land sales, following a similar decision for a prior assessment year, the tribunal also remanded this issue to the AO for re-evaluation with specific directions for verification with KSREC. Both issues were allowed for statistical purposes.
Key Issues
1. Whether an INR 25 lakh cash deposit is unexplained money under Section 69B. 2. Whether income from land sales is agricultural income exempt under Section 10(1) or business income.
Sections Cited
250, 143(2), 142(1), 69B, 143(3), 10(1)
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Sandeep Singh Karhail
O R D E R
Per Sandeep Singh Karhail, JM :
The assessee has filed the present appeal against the impugned order dated 12/02/2024, passed under section 250 of the income tax Act (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2016-17.
When this appeal was called for hearing, neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. Therefore, we proceed to decide the present appeal on the basis of the material available on record and after consideration
The first issue that arises for our consideration pertains to an addition of INR 25 lakhs received by the assessee is advanced for sale of immovable property.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual, and for the year under consideration filed his return of income on 31/03/2018, declaring a total income of INR 29,02,000 and agricultural income of INR 3,99,92,915. The return filed by the assessee was selected for scrutiny through CASS in order to verify the large value of sale and investment in properties during the year. Accordingly, statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee deposited a sum of INR 25 lakh in his bank account maintained with the South Indian Bank Ltd. As per the assessee, he was Managing Director of a company, which vide a resolution dated 30/11/2015, authorised him to find prospective buyers to receive the sale consideration on behalf of the company and also to execute the necessary sale deed. Accordingly, on the basis of the said resolution, the assessee claimed that he received an amount of INR 25 lakh on 20/12/2015 and deposited the same in his saving bank account maintained with South Indian Bank Ltd. The assessee further claimed . Babu Chandrathil George . that he collected INR 2,28,50,000 on various dates and INR 46,75,000 was collected in the accounts of the company on 20/09/2016. Thus, in total INR 3,25,00,000 was collected toward the sale consideration of the property owned by the company. The Assessing Officer (“AO”), vide order dated 25/12/2018 passed under section 143 (3) of the Act, disagreed with the submissions of the assessee and held that the resolution dated 30/11/2015 only authorised the assessee to find out, negotiate and enter into agreement for sale of its immovable property, however, it never authorised the assessee to accept the money and deposit in his personal account. The AO further held that the assessee has failed to furnish the name of the person who has advanced a sum of INR 25 lakh in cash to him to purchase the property owned by the company. The AO held that the assessee has furnished a confirmation from the person(s) written on a plain piece of paper dated 19/12/2018, however, the same is not reliable because of the fact that he has failed to establish the identity of such persons. Thus, the AO held that the assessee has completely failed to prove the source of the above cash deposits and barely made submissions, which are contrary to the facts and unsubstantiated by any evidence. Accordingly, the sum of INR 25 lakh was treated as unexplained money in the bank account of the assessee and assessed to tax under section 69B of the Act.
The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the confirmation from 6 persons submitted by the assessee in respect of the advances . Babu Chandrathil George . amounting to INR 25 lakh received in cash is common. The learned CIT(A) further held that the confirmation filed by the assessee does not contain the specific details of payment received and essential details to establish the receipt of cash as advance for the immovable property transaction. Further, the complete name and address, PAN of the person, a copy of the income tax return or similar document to prove the person's creditworthiness, and a copy of the registered agreement containing a reference of payment in cash are not furnished by the assessee. Moreover, documents related to antecedents of the property, i.e., record of the property in books of the company were also not furnished. Thus, the learned CIT(A) held that in the absence of these documents the assessee has failed to establish the linkage of the cash deposited with the transaction of sale of property of the company. Accordingly, the learned CIT(A) upheld the addition made by the AO under section 69B of the Act.
Having considered the submissions of the learned DR and perusal of the material available on record, we find that an addition amounting to INR 25 lakh was made by the lower authorities under section 69B of the Act as the assessee failed to substantiate the identity and creditworthiness of the persons from whom he has received the amount in cash. We find from the record that in order to substantiate the receipt of payment in cash purportedly for the sale of the immovable property belonging to the company in which the assessee is the Managing Director, the assessee furnished the confirmation from . Babu Chandrathil George . the purchasers. However, it is evident from the record that the lower authorities did not find the confirmation to be sufficient evidence to substantiate the claim of the assessee. As noted in the foregoing paragraphs, the learned CIT(A) enlisted the list of information/documents which could substantiate the receipt of cash amounting to INR 25 lakh deposited in assessee’s bank account. However, we find that there is neither any mention of any notice being issued to the assessee to furnish these documents nor any opportunity having been granted to the assessee to furnish the details as mentioned. We further find that the lower authorities have disputed the identity of the persons from whom the assessee has received the amount of INR 25 lakh in cash. However, it is evident from the record that neither the assessee was directed to produce the said persons nor was any summon issued to them for necessary examination. Accordingly, in view of the facts and circumstances pertaining to this issue, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo adjudication with a direction to the assessee to furnish the documents/information as mentioned in the impugned order. We further direct that the AO shall be at liberty to seek any other information pertaining to this issue from the assessee and if required, may also direct the assessee to produce these persons to whom the property of the company was sold. Accordingly, with the above directions, the impugned order is set aside, and this issue is decided in favour of the assessee for statistical purposes.
The next issue that arises for our consideration in the present appeal pertains to the rejection of the claim of exemption under section 10(1) of the Act and the addition on account of profit from the sale of an undivided share of land.
The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee sold 41.47 acres of land in RSY No. 312/8 and 312/6 at Nedumassery village. The surplus out of the above sale transaction aggregating to INR 3,99,92,915 was claimed by the assessee as agricultural income and exempt. The AO, vide order passed under section 143(3) of the Act, disagreed with the claim of the assessee on the basis that the assessee’s business is dealing in lands and he is also a builder. In this regard, the AO noted various transactions of purchase and sale of land and properties undertaken by the assessee from the assessment year 2001-02 to 2016-17. The AO further noted that the assessee is a director/partner in various entities, which are engaged in the business of real estate/builders. After taking into consideration the fact that in the previous years, the assessee has undertaken transactions aggregating to more than 100 in number, the AO held that dealing in lands is the business of the assessee and land has always been stock in trade for the assessee. Accordingly, the sum of INR 3,99,92,915 received by the assessee from the sale transaction was considered as business income of the assessee. Similarly, the profits
The learned CIT(A), vide impugned order,upheld the additions made by the AO. Being aggrieved, the assessee is in appeal before us.
Having considered the submissions of the learned DR and perused the material available on record, we find that the land admeasuring 41.47 acres of land in RSY No. 312/8 and 312/6 at Nedumassery village was sold to Mr. Martin vide two sale deeds, executed during the financial year 2014-15 and 2015-16. We find that while considering a similar issue in assessee’s own case in ITO v/s Babu Chandrathil George, in ITA No. 64/Coch./2023, vide order dated 03/05/2024, for the assessment year 2015-16, the coordinate bench of the Tribunal issued the following directions: – “4.4 With these observations, we, even as stated at the conclusion of the hearing, setting aside the impugned order and vacating the findings by the ld. CIT(A), remand the matter back to the AO for the purpose. The AO shall, after hearing the assessee in the matter, forward the coordinates of the said land, identified by survey numbers, as well as of the local limits of the Municipality as on 16.02.2015, to KSREC, which shall report thereto, based on which he shall decide the matter. The burden to provide the primary information is on the assessee, which though the AO has the right to verify, and be satisfied with. Where not, he shall, state his reasons for the same, i.e., for not agreeing with that advanced by the assessee, forward both the set of coordinates, along with reasons, to KSREC, seeking it’s opinion in the matter, and shall decide on the basis of it’s report, unless of course the AO effectively rebuts it with an expert opinion, duly confronting the assessee therewith. As afore-noted, the matter warrants and, in fact, admits of a precise measurement, and the scope for an ‘opinion’ in the matter is extremely limited. The AO’s right to take a different view, which though cannot, inasmuch as he is to abide by law, be excluded, . Babu Chandrathil George . is to, for it to be judicially sustainable, be reasoned and supported by credible evidence.”
Since the addition under consideration pertains to the transaction considered by the coordinate bench of the Tribunal in assessee’s own case in the preceding assessment year, therefore we restore this issue to the file of the jurisdictional AO to comply with the directions as rendered by the coordinate bench in the decision cited supra. Accordingly, the impugned order on this issue is set aside, and grounds raised by the assessee pertaining to this issue are allowed for statistical purposes.
In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced on this 28th day of March, 2025.