Addition of Unexplained Cash not sustainable when Primary onus was discharged by sufficient evidence: ITAT [Read Order]

The addition of unexplained cash is not sustainable when the primary onus was discharged by sufficient evidence, the Mumbai bench of the Income Tax Appellate Tribunal(ITAT) set aside the order of addition under section 68 of the Income Tax Act.

The appellant assessee, Vishwanath Ramchandra engaged in the business of transportation, hiring out of JCB, proclaim and dumpers and is a partner in three partnership firms. The Assessing Officer, noticed that the assessee has credited a sum of Rs. 1,77,32,218/- to his capital account which was asked to explain sources of the same and failed to produce by the assessee. The Assessing Officer completed the assessment with the amount of Rs. 1,77,32,218/- as unexplained cash credit under section 68 of the Act.

The assessee furnished various details on appeal before CIT(A) who remanded the matter to the AO. The AO held that the amount of Rs.2,11,99,999/- claimed to have been received from M/s Samarth Enterprises was unexplained cash credit and is taxable as a gift in the hands of the assessee under section 56(2) of the Act.  The CIT(A) confirmed the addition made u/s 68 of the Act.

 In pursuance of the agreement for the purchase of property, the assessee has received the sum of Rs.2,11,99,999/- from M/s Samarth Enterprises as against the agreed consideration of Rs.2,75,00,000/-. The assessee contended that the purchaser, viz., M/s Samarth Enterprises has not paid the balance consideration and hence the sale deed could not be executed. The assessee has also given copies of notices sent to M/s Samarth Enterprises asking them to complete the transaction.

It was observed that there was sufficient reason for the assessee not completing the sale transaction and the AO has not argued that the assessee has not discharged the initial onus placed upon it.  The independent enquiry has been made by AO and the intended buyer has also confirmed the transaction and MOU. 

Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary while allowing the appeal observed that when the assessee has discharged the onus placed upon him in respect of cash credit and the assessing officer could not disprove them then the addition made u/s 68 cannot be sustained.

The Tribunal set aside the order passed by CIT(A) and directed the AO to delete the addition of Rs.2,11,99,999/- made u/s 68 of the Act. The assessee was represented by Shri Devendra Jain and the department was represented by Ms Vrunda Matkarni.

To Read the full text of the Order CLICK HERE

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