No Addition if Assessee able to Prove Genuineness of Transaction: ITAT [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ), while upholding a decision of CIT (Appeals) deleting an addition of Rs. 67,50,00,000/- held that if the assessee is able to prove the genuineness of transaction, it cannot be treated as unexplained under Section 68 of the Income Tax Act, 1961.

The sole issue was regarding the amount shown as Sundry Creditor crores under the head “Current Liabilities” in the books of accounts of the assessee. The Assessing Officer, while completing the assessment for the relevant year, treated the same as unexplained credit.

The assessee submitted that the amount appeared by virtue of an advance amount paid for the purchase of lands in furtherance of the execution of the agreement to sell.

The Assessing Officer merely rejected the explanation of assessee on the ground that the assessee has failed to explain how they signed and executed the agreement to sell in the year 2010 while the stamp paper was issued 2 years after the date of execution i.e. in the year 2012.

Considering the submissions from both sides, the Tribunal held that for the irregularities observed by the AO in respect of the non-judicial stamp paper, the assessee is liable for action under the provision Indian Stamp Act and may proceed against assessee under the same.

According to the bench, the AO omitted to note that the entire amount was received in 04 installments through RTGS, through banking channel, in March 2010. “If the stamp paper was purchased later on in March 2012, such entries in the bank account of the assessee could not have been recorded in March 2010.”

“Agreement to Sell was executed on a Non-Judicial Stamp Paper in the year 2012, on which, inadvertently the date of Original Agreement was mentioned. This has created a doubt in the mind of the A.O. to reject the explanation of the assessee. The A.O. recorded the statement of Stamp Vendor etc., in order to arrive at the finding of fact against the assessee. However, the A.O. has forgotten to note that the entire amount was received in 04 installments through RTGS, through banking channel, in March 2010. If the stamp paper was purchased later on in March 2012, such entries in the bank account of the assessee could not have been recorded in March 2010. Therefore, on the mere purchase of the stamp paper or recording Agreement to Sell in March 2012, is of no consequence. Further, assessee need not resort to any irregularity or illegality because the law permits that even oral agreement could have been entered into, which, itself is sufficient to believe the explanation of assessee,” the bench said.

While granting relief to Assessee, the Tribunal further observed that the assessee, apart from that the creditor directly confirmed the transaction with the assessee, in response to notice under Section 133(6) of the I.T. Act, filed confirmation of the creditor, their affidavits, their ITR and balance sheet, which proved the identity of the creditor, their creditworthiness and genuineness of the transaction in the matter.