A.S THILLAINAYAGAM, CHENNAI V. DCIT, CENTRAL CIRCLE-1(3), CHENNAI

ITA 102/CHNY/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6230 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 14-02-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Onus to prove
• Section: 68; 143(3); 234B; 73

Judgement Text

आयकर अपीलीय अिधकरण ‘सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा01 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम1। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.102/Chny/2022 (िनधाBरण वषB / Assessment Year: 2017-18) A.S. Thillainayagam Old No.2, New No.3, 7 th Street, Gopalapuram, Chennai-600 086. बनाम/ V s. DCIT Central Circle-1(3), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AF RP A- 5 8 0 2 - Q (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Ms. Vidya (CA) – Ld. AR थ की ओरसे/Respondent by : Shri P. Sajit Kumar (JCIT) – Ld. DR सुनवाई की तारीख/Date of Hearing : 19-07-2022 घोषणा की तारीख /Date of Pronouncement : 17-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 22-12-2021 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 26-12-2019. The grounds taken by the assessee are as under: 1. The Order of the Deputy Commissioner of Income Tax, Central Circle 1(1), Chennai (AO in short) is without jurisdiction, is contrary to law, facts and circumstances of the case and is opposed to the principles of natural justice, equity and fair play. ITA No.102/Chny/2022 - 2 - 2. The Learned AO erred in determining the taxable income at Rs.2,58,64,490/- as against the returned income of Rs 8,64,490/-. 3. The Learned AO erred in treating the amount received towards advance for sale of land as unexplained cash credit without giving an opportunity to the appellant to explain the same. 4. The Learned AO erred in charging interest u/s 234B and 234C of the act. As evident, the assessee is aggrieved by confirmation of certain addition of unexplained cash credit. 2. The Ld. AR advanced arguments and submitted that the proceeds were received by the assessee in the bank account as evidenced by the sale agreement. The Ld. Sr. DR, on the other hand, controverted the arguments of Ld. AR and submitted that the agreement under consideration did not fructify at all. Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident individual was assessed u/s 143(3) on 26.12.2019. It transpired that the assessee made cash deposit of Rs.32.88 Lacs and made cash withdrawal of Rs.165.03 Lacs from two bank accounts maintained by him. Accordingly, the assessee was required to explain the source of the deposit as well as to demonstrate application of funds. 3.2 The assessee submitted that cash withdrawal was out of advance received on sale of land as evidenced by sale agreement dated 08.07.2016 in favor of one Shri K.B. Kumar. Upon perusal of agreement, it was observed that the assessee entered into an agreement for sale of 110 acres of land at Villupuram Village. The assessee owned only 73 acres and 23 cents on the date of agreement and balance 36 acres and 77 cents were intended to be purchased by ITA No.102/Chny/2022 - 3 - the assessee. Out of 73 acres and 23 cents, the assessee has initially offered to sell 50 acres for a consideration of Rs.550 Lacs against which the assessee received advance. 3.3 However, the assessee did not furnish any reply with respect of application of cash withdrawal. It merely submitted that it holds an average of Rs.1 Crores as cash in hand. However, the said claim was held to be not supported by any evidence. 3.4 It further transpired that the sale transaction was never completed and apart from advances received in financial year 2016-17, the assessee received further advance of Rs.17 Lacs during financial year 2019-20 and stated that the agreement was still valid. 3.5 Shri K.B. Kumar filed reply dated 05.12.2019 and furnished the details of payment made to the assessee and stated that the sale had not concluded till date. The copies of return of income evidencing the transaction with the assessee was not furnished by him. The summons issued to Shri K.B. Kumar remained un-responded and only a reply was furnished wherein it was reiterated that the payments were made to the assessee. The copies of his bank accounts and copies of Income tax returns for 3 years were also furnished. 3.6 After going through the agreement, Ld. AO observed that it could not be understood as to how the assessee could enter into an agreement of sale for the properties which were not owned by him and which he intended to buy at a future date. Therefore, the genuineness of the agreement was questionable. Even after a lapse of 3.5 years, the agreement did not fructify into sale. The buyer’s financial capacity to pay the advance do not support the genunity of the transactions which was evidenced by the fact that the returned income of the ITA No.102/Chny/2022 - 4 - intended buyer was less than Rs.13 Lacs during each of AYs 2017-18 to 2019-20. The conduct was beyond normal human behavior. The bank account revealed that there was no transaction except payment to the assessee. The buyer did not appear against summons issued u/s 131. The receipts of Rs.17 Lacs as furnished by the assessee revealed that these receipts were after the issue of notices by the department calling for the details of the transactions. The assessee has suddenly received the amount of Rs.17 Lacs after a gap of 3 years and 4 months. No evidence was shown that any steps were taken to fulfill the agreed terms as per mandate and timeline of the agreement. The clauses of the agreement and terms of timeline were not met with. Therefore, the transaction was held to be not genuine and used as a colorable device to route the assessee’s unaccounted income. Finally, the advance of Rs.250 Lacs was held to unexplained credit u/s 68 which would be taxable as per the provision of Sec. 115BBE. Appellate Proceedings 4. During appellate proceedings, the assessee assailed the addition and submitted that the cash deposits and withdrawals were duly evidenced and the conclusions drawn by Ld. AO were erroneous. It was also submitted that the agreement was still valid and the advances were received under the agreement which were withdrawn from the bank. 5. However, Ld. CIT(A) observed that the agreement, though mandatorily required to be registered, was not registered as per the provisions of Indian Registration Act and therefore, the credibility of the agreement becomes doubtful. The agreement was entered into for properties not owned by the assessee at all. No prudent person would ITA No.102/Chny/2022 - 5 - advance huge sum of Rs.250 Lacs for purchase of properties not owned by the assessee. The agreement not only covers the properties owned by the assessee but also those properties which were not owned by the assessee. Further, the terms of the agreement were not adhered to. The buyer lacked financial capacity. The onus to prove the credits was entirely on the assessee which was not discharged. Therefore, the addition was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 6. Upon due consideration of material facts, we find that the assessee has entered into sale agreement for properties owned by him as well as properties not owned by him. The assessee received advances from the intended buyer whose return of income was meagre to justify the advances as given to the assessee. There was no other transaction in the bank account of the intended buyer. The agreement was an unregistered document though it mandatorily require registration as per extant laws. The summons issued to the buyer remained responded. We also concur with the other observations made by lower authorities in this regard to doubt the genuineness of the transactions. On the basis of the same, it could be said that the burden as required under law was not discharged by the assessee. 7. Having said so, considering the fact that the advances have been received through banking channels and the assessee has produced payments receipts in subsequent years, we deem it fit to grant another opportunity to the assessee to substantiate the source of deposits as well as to demonstrate application of funds. Considering the facts of the case, we remit the matter back to the file of Ld. AO for denovo ITA No.102/Chny/2022 - 6 - adjudication after affording reasonable opportunity of hearing to the assessee. The onus is on assessee to substantiate the transactions. 8. The appeal stand allowed for statistical purposes. Order pronounced on 17 th August, 2022. Sd/- (MAHAVIR SINGH) उपा01 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे,ई / Chennai ; िदनांक / Dated : 17-08-2022 EDN/- आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF