Claim supported by affidavit cannot be rejected without any enquiry or material brought on record to disprove the claim of the assessee – ITAT
ABCAUS Case Law Citation:
ABCAUS 1200 (2017) (04) ITAT
The assessee was aggrieved by the order passed by the CIT(A) confirming the addition u/s 69A of Rs. 20 lacs for cash deposited in his bank account.
Assessment Year : 2009-10
Date/Month of Pronouncement: April, 2017
Brief Facts of the Case:
The appellant assessee was an individual carrying on legal profession. In the course of the assessment proceedings, the Assessing Officer (AO) on the basis of information available on record found that the assessee was maintaining a Savings Bank account jointly with two other persons. On verifying the bank statement, AO found that cash deposits of Rs. 20 lacs was made in the said bank account during the relevant previous year, which had neither been accounted for in the books of account nor shown in the balance sheet. The assessee was called upon to explain the source of cash deposit in the said bank account.
According to the AO, inspite of adequate opportunity being given, the assessee failed to furnish any explanation regarding the source of cash deposits. The AO therefore, concluded that the cash deposits of Rs.20 lacs had to be treated as unexplained money in terms of section 69A of the Income Tax Act, 1961 (‘the Act’) and added it back to the income of the assessee.
The assessee challenged the addition before the CIT(A). Before the FAA, the assessee explained that the said amount of Rs. 20 lakh was received from his uncle towards loan. In support of said contention, the assessee produced confirmation letter supported by affidavit from his uncle. Further, explaining the credit worthiness of the creditor, the assessee submitted that the said amount was advanced to the assessee out of sale proceeds of agricultural land available with his uncle. In support of his contentions, the assessee as additional evidence, also produced copies of sale agreement. The CIT(A) called for a remand report from the AO and after examining the same, he held that the assessee’s claim that he had received an amount of Rs.20 lacs as loan from his uncle was not trustworthy. He observed, while the assessee had deposited Rs.20 lacs claimed to have been received from his uncle in the month of June 2008, the sale of agricultural land from which assessee’s uncle claimed to have sourced the loan advance were executed in May 2009. CIT(A), therefore, was of the view that prior to the date of sale of agricultural land, assessee’s uncle could not have got the money to advance as loan. He, therefore, opined that the explanation of the assessee that he had received the amount from his uncle was only an after-thought hence, not believable. Accordingly, he confirmed the addition of Rs.20 lacs u/s 69A.
Contentions of the Appellant Assessee:
It was submitted that the assessee had not only explained the source of cash deposit by furnishing requisite explanation but also supported it with evidence in the form of confirmation letter and affidavit of the creditor. The source of the cas was also explained by furnishing the sale agreement of agricultural land from which his uncle got money to advance loan to the assessee.
It was further submitted that in no case, the provisions of section 69A were attracted as the entries relating to receipt of Rs. 20 lacs were not only recorded in the books of account and formed part of the balance-sheet but the assessee in course of assessment proceedings had also explained the source of such deposit. Therefore, it could not be treated as unexplained money u/s 69A of the Act. It was submitted that even otherwise also, the assessee had not only explained the source of cash deposited in the bank account by furnishing confirmation of the person, who advanced the loan to him but has also furnished an affidavit of the concerned person. That being the case, without making any investigation and inquiry to controvert the claim of the assessee and without bringing any material on record, the AO could not have made the addition.
Observations made by the Tribunal:
The Tribunal observed that the assessee had substantiated his claim of receiving money from his uncle by furnishing confirmation supported by affidavit and he had also explained the source from which his uncle had advanced such amount by producing copies of the sale agreement for sale of agricultural land. However, the departmental authorities refused to accept the claim of the assessee.
The Tribunal also noted that the AO had made the addition by treating the amount of Rs. 20 lacs as unexplained money u/s 69A. However, section 69A applies in a case where the assessee is found to be owner of money, bullion, jewellery etc., which has not been recorded in the books of account maintained by him and the assessee offers no explanation about the source of such money, bullion, jewellery etc., to the satisfaction of the AO, then it will be treated as unexplained money of the assessee u/s 69A of the Act. However, in the present case, the amount of Rs. 20 lacs was found in the Savings Bank Account of the assessee, further, the said amount had also been recorded in the books of accountas in the balance sheet of the assessee the said amount appeared as unsecured loan. Moreover, there was no dispute that the source of such money was explained as from the bank account of the assessee. Therefore in the aforesaid view of the matter, the ITAT opined that the amount of Rs. 20 lacs could not be treated as unexplained money u/s 69A of the Act.
It was observed that in the worst case, the AO could have considered the amount as unexplained cash credit u/s 68 of the Act. However, there was no dispute that assessee had explained the source of such cash deposit in his bank account to have come from the loan advanced by his uncle. Also the assessee had submitted confirmation letter as well as affidavit of his uncle stating that he had advanced amount of Rs.20 lacs as loan. To prove the source of Rs. 20 lacs at the hands of his uncle, assessee had produced the sale agreement for sale of agricultural land.
The ITAT observed that the AO had not conducted any enquiry to ascertain the credit worthiness of his uncle. The departmental authorities had discarded the claim of the assessee merely on presumption and surmises. Merely because the sale agreements were subsequent to the date of advancement of loan, it could not be presumed that the creditor had no credit worthiness to advance the amount.
The Tribunal observed that the assessee had not only explained the source of deposit but also substantiated it by producing the confirmation letter from the creditor supported by an affidavit. If the department disbelieved the claim of the assessee, it must not only make enquiry but also bring material on record to disprove the claim of the assessee.
In the absence of any such enquiry and material brought on record, the claim of the assessee cannot be rejected / disbelieved on mere presumption and surmises. Accordingly, the addition was deleted by allowing the relevant ground.