Cash deposited on same day of sale deed execution has a prima facie direct nexus between source of cash deposit and sale transaction – ITAT
ABCAUS Neutral Case Law Citation:
ABCAUS 3676 (2023) (02) ITAT
Important Case Laws relied upon by parties:
CIT Vs. Intezar Ali
Shri Pappu Ram Saran vs. ITO
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition made by the Assessing Officer (AO) towards cash deposits in his bank account.
The assessee had deposited large amount of cash in his bank account. The return of income for the relevant Assessment Year was also not filed by the assessee.
The AO after recording reasons for income escaping assessment issued notice under section 148 of the Income Tax Act, 1961 (the Act).
The assessee submitted that the source of the cash deposited was proceeds of sale of agricultural land, agricultural income and earlier withdrawals made from his bank account. In support, the assessee submitted copy of the agreement to sell and the copy of the sale deed executed.
The AO recorded the statement of the buyer after issuing summons u/s 131 of the Act. However, the buyer did not confirm the claim of the assessee with respect of the amount of sale consideration.
The AO did not agree to the explanation of the assessee and allowed source of deposits to the extent of the sale consideration as stated in the sale deed only and the remaining deposits were held to be unexplained.
Before the CIT(A), the assessee submitted that he had received the entire sale consideration in cash at home and he was not aware about the fact that the land being sold by him was got registered at the collector rate which was less than the sale consideration received.
It was submitted that the assessee was an illiterate and he has no motive to get the sale deed of land registered at lower price than the market rate because the land sold was an agricultural land not being a capital asset and no capital gain arises on the transfer of this agricultural land within the meaning of IT Act.
It was submitted that the buyer had not denied the agreement but to all other questions, she gave a stereotype reply.
It was submitted that AO had given the credit of the amount mentioned in the registered sale deed but ignored the agreement to sell by which the assessee had received the cash.
The CIT(A) however did not accept the explanation submitted by the assessee and the dismissed the appeal.
The Tribunal observed that the buyer in her statement stated that she was not aware of exact amount of sale consideration as the sale transaction was undertaken by her father-in-law on her behalf.
The Tribunal also noted that given the fact that buyer’s father-in-law had expired, no further examination of any other person including the husband or any other witnesses was carried by the Assessing officer.
The Tribunal opined that the statement recorded did not support the case of the Revenue which was the sole basis of discrediting the explanation so submitted by the assessee.
Further, the Tribunal observed that as evident from the bank statement of the assessee, cash was deposited on the same day when sal deed was registered which lends credence to assessee’s contention that there was direct nexus between receipt of sale consideration and deposits thereof in bank.
The Tribunal observed that the coordinate bench had held that where the cash was deposited on the very next day of entering into the sale deed, a direct nexus has been prima facie established between source of cash deposit and sale transaction and in absence of any contrary material brought on record, the explanation of the assessee regarding the source of deposit cannot be disputed.
The Tribunal opined there was deposit of cash on the very same day on which the sale deed was executed, therefore a clear nexus has been established between source of such cash deposit and sale transaction. In absence of any contrary evidence brought on record in terms of statement of witnesses and comparative sale data of similar transaction undertaken at same/nearby location at a value different from what has been claimed by the assessee, the explanation so furnished by the assessee cannot be disputed.
Accordingly, the ITAT directed the AO to delete the addition and allowed the appeal in favour of the assessee.
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