Asking written Agreement to Sell was arbitrary & perverse when Law permits oral contacts – ITAT

Insistence of tax authorities to produce a written Agreement to Sell was arbitrary perverse and unreasonable when Law permits oral agreements.

There is no law that cash withdrawn from bank cannot be held in cash. ITAT accepts cash deposits out of withdrawals made 4 months earlier

ABCAUS Case Law Citation:
ABCAUS 3087 (2019) (07) ITAT

Important Case Laws Cited/relied upon by the parties:
Smt. Kavita Chandra Vs CIT 

The instant appeal was filed by the assessee assailing the correctness of the order of CIT(A)in upholding the action of the Assessing Officer (AO) in making addition in respect of cash deposits in Bank.

The assessee was an agriculturist who had withdrawn cash from his Saving Bank Account part of which, after a gap of about four months, had been deposited back in the said bank accounts.

The said redeposit was doubted by the AO and added back. The CIT(A) also sustained the addition.

Before the Tribunal, it was submitted that the fact that the assessee was an agriculturist was not disputed. There was no hint or suggestion that the assessee had any other source of income.

It was submitted that the availability of the amounts with the assessee in the bank accounts was accepted. The occasion for concluding that it was undisclosed bank account of the assessee did not arise as the assessee being agriculturist had never been an income tax assessee, so there was no occasion to disclose.

The assessee submitted that the withdrawals had been made for purchase of the property but since the investment contemplated did not fructify, part of the amounts were re-deposited back in the bank account. However, the  Department required the assessee to produce a cancelled agreement. It was submitted that the presumption of a written Agreement to Sell was an unnecessary insistence since there is no bar for an assessee to enter into an oral agreement to purchase land.

It was further submitted that the Department forcing the assessee to name the person with whom he had an agreement or from whom he unilaterally believed on the offer of money a piece of land could be purchased was putting the assessee at the mercy of a person who might or might not for his own reasons own up or refuse to own up the correct facts before the tax authorities.

Controverting the finding of the CIT(A) and the arguments of the Revenue, it was submitted that the fact that lesser amount instead of the full amount is being redeposited, by itself cannot lead to the conclusion that the claim was false. It was stated that in case the law required the AO to ask where he had spent the money, he could well have asked. However, there is no such requirement. Also, nothing had been brought on record by the tax authorities to show that the funds having been utilized elsewhere.

The Tribunal observed that the availability of funds for re-depositing in the said bank accounts had been consistently well addressed. No evidence rebutting the claim was available on record.

The Tribunal concurred with the submissions of the assessee that how would naming a property identified for a purported purchase or a person with whom there was an oral Agreement, make the claim more plausible.

The Tribunal pointed out that the law permits oral agreements and the tax authorities insistence in the circumstances to produce a written Agreement to Sell admittedly was arbitrary perverse and unreasonable.

The Tribunal opined that the fact that the contemplated transaction did not materialize was self evident. Had there been any evidence that the amounts had been utilized elsewhere, then the position would have varied. In fact there was no such instance, reference, argument or evidence to suggest that the funds were not available with the assessee or for reasons mentioned could not have been available to the assessee. It was for the department to bring some evidence in support of its claim, suspicion or allegation on record.

The Tribunal said that admittedly, there is no law that cash withdrawn from the banks cannot be held/retained in cash. Also, there could also be no blanket period which can be judicially considered to be a reasonable time.

The Tribunal opined that a gap of about four months by itself in the circumstances did not lead to any conclusion which detracts from the merits of the claims made. The reasonableness of the explanation had to be decided considering the facts and the peculiar circumstances of each case.

Accordingly, the addition sustained was directed to be deleted.

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addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc icai announcement income tax penalty itat ITAT Delhi mca circular MCA notification penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes