Execution of registered sale deed adjusting cash credit entries in books establishes identity of depositors -High Court

Execution of registered sale deed adjusting cash credit entries in books establishes identity of depositors of money beyond doubt-High Court upheld deletion of additions made u/s 68

ABCAUS Case Law Citation:
ABCAUS 2140 (2017) (12) HC

The Challenge/Grievance:
This instant appeal was filed by the Revenue under Section 260A of the Income Tax Act, 1961 (the Act) against the order of the Income Tax Appellate Tribunal (ITAT).

Brief Facts of the Case:
The assessee was an individual engaged in construction and sale of residential flats. His return of income for the relevant assessment year was taken up under scrutiny. The assessment was completed by the Assessing Officer (AO) inter alia making addition of Rs. 37,10,000/- on account of unexplained cash credit under Section 68 of the Act.

Commissioner of Income Tax (Appeal) however partly allowed the appeal of the assessee by restricting the addition to Rs 1,70,000/-.

The revenue inter alia challenged the deletion of unexplained cash credit by CIT(A).

The Tribunal found that the entire cash credit was recorded in the assessee’s books of account and stood duly explained and reconciled inasmuch as the entire amount of Rs. 37,10,000/- was found to have been adjusted against the sale consideration for different flats sold by the assessee in different assessment years, to the same persons in whose name those cash credit entries were found existing in the assessee books of account. Thus the ITAT, in face of registered sale-deeds found existing in favour of those very persons, rejected the reasoning of the AO that the identity of the persons in whose cash credit entries standing was not established.

Observations made by the High Court:
The Hon’ble High Court observed that there was nothing to doubt the correctness of the finding of the Tribunal that upon two remand reports, the entire cash credit entry of Rs. 37,10,000/- considered for the purpose of addition made under Section 68 of the Act, stood reconciled against different sale deeds executed by the assessee.

The Hon’ble High Court opined that once registered sale deeds had been executed by the assessee and the cash credit entries found standing in the books of account of the assessee had been adjusted against the same, there remained no further doubt as to the identity of the persons who deposited the money with the assessee.

The Hon’ble High Court opined that the fact that such person did not receive the letter or did not appear in person during the inquiry made by the Ao at the original assessment stage got overshadowed and lost its relevance in absence of any evidence to doubt the genuineness or correctness of registered sale deeds executed by the assessee.

Decision/ Conclusion/Held:
The appeal of the Revenue was dismissed as lacking merit.