The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that sale proceeds of agricultural land is not taxable as capital gain.
The aforesaid observation was made by the Chennai ITAT when three appeals was preferred before it by the assessee as against two different orders of the Commissioner of Income Tax (Appeals)-, Chennai in ITA Nos.581 & 582/Chny/19-20, dated 03.03.2022.
The assessments in ITA Nos.170 & 172/Chny/2022, were framed by the JCIT, Range 1, Trichy for the assessment years 2010-11 & 2011-12 u/s.143(3) of the Income Tax Act, 1961. vide orders dated 31.03.2013 & 31.03.2014 respectively, and the third appeal in ITA No.171/Chny/2022, is against the assessment order framed in consequence to the revision order passed by PCIT, u/s.263 of the Income Tax Act and consequent order of the AO for the assessment year 2010-11 u/s.143(3) r.w.s. 263 of the Income Tax Act dated 12.03.2015 passed by the DCIT, Circle-1, Trichy.
The common issue in ITA No.170 & 172/Chny/2022, for the assessment year 2010-11 & 2011-12 ,as regards to the order of CIT(A) confirming the action of AO in upholding the addition made by AO on account of unexplained cash credit u/s.68 of the Income Tax Act, for an amount of Rs.7,56,74,000/- for assessment year 2010-11 and Rs.1,98,00,000/- for the assessment year 2011-12, the relevant grounds raised by assessee were as to whether the CIT(A) has erred in upholding the addition of Rs.7,56,74,000/- as unexplained Cash Credits u/s.68 of the Income Tax Act, as to whether the applicant having provided proper explanation and proof regarding the credits, the CIT(A) went wrong in confirming the addition made, and also as to whether the appellant, having submitted that the credits were loans received back advanced earlier by him, the CIT(A) erred in rejecting the same based on assumptions and surmises, thus making the addition liable to be deleted in full.
The aforesaid questions being the assessee’s grounds of appeal, the brief facts of the case pertaining to the issue were that the assessee was an individual deriving income from various business and sources, namely Dhanalakshmi Agencies – Running a Petrol Bunk , sale proceeds on account of sale of agricultural land owned by the assessee, maintaining a JCB and hiring it the same for rent ,Dhanalakshmi Mini Bus – Doing transport business by way of maintaining two route buses and one spare bus at Perambalur ,dairy business at Perambalur , salary from Dhanalakshmi Chits (Pvt.) Ltd., rental Income from residential house at Trichy , and interest income and income from other sources (Brokerage / Commission)
It so happened in the assessee’s case that the AO noted the fact that the assessee had maintained detailed books of accounts for these lines of his business activities, and that for the assessment year 2010-11 ,there was a sudden increase in the cash deposit on various dates during financial year 2009-10 relevant to the assessment year in question , amounting to Rs.9.99 crores in the current account of the assessee.
Therefore considering the explanation of the assessee as regards to the source of income and also as regards to the other cash credits, the AO finally added a sum of Rs.7,56,74,000/- as claimed by assessee, with the amount representing loan accounts received back from various persons i.e., sundry debtors living in and around Perambalur District as unexplained cash credit u/s.68 of the Income Tax Act , the being added to the returned income of the assessee.
Similarly, in the assessment year 2011-12, the AO further noticed that there were cash deposits in the current account maintained in the books of Dhanalakshmi Agencies, amounting to Rs.1,14,00,000/- ,on various dates ,and another cash deposit in current account maintained with Dhanalakshmi Mini Bus to the extent of Rs.1,91,00,000/- crores during the financial year 2010-11. And after considering the explanation of the assessee, the A.O accepted the explanation of the assessee to the extent of Rs.1,07,00,000/- , thus adding the balance sum of Rs.1,98,00,000/- as unexplained cash credit u/s.68 of the Income Tax Act.
Being aggrieved in both the years, the assessee came in appeal before the CIT(A). who, after considering the submissions of the assessee, the remand report submitted by the assessee, the paper book and other evidences filed by the assessee, thus confirmed the action of the AO . And it is in agitation of the same, that the assessee has preferred the instant appeal before the Chennai ITAT.
Hearing the opposing contentions of either sides as submitted by Shri G. Baskar, the Advocate for the assessee, and Shri Darzakhum Songate, CIT, on the Revenue’s behalf, the ITAT Bench consisting of Manoj Kumar Aggarwal , the Accountant Member and Mahavir Singh , the Vice President noted :
“We have heard rival contentions and gone through facts and circumstances of the case. We noted that only sundry credit claimed by assessee is in the name of Murugan Traders from whom the assessee has obtained loan of Rs.3 crores. The AO required the assessee to file confirmation and assessee filed confirmation of Murugan Traders having Permanent Account NoAATFM1756G.”
“The AO deputed an Inspector but since at the given address, the person was not available, the AO accordingly made addition of this Rs.3 crores as unexplained cash credit u/s.68 of the Act. Aggrieved, assessee preferred appeal before CIT(A).”
“The CIT(A) also confirmed the action of the AO by holding that the assessee is unable to prove the genuineness of transaction or the creditworthiness of the payer. The assessee before CIT(A) stated that there is no actual cash flow between the assessee and Murugan Traders but credit for a sum of Rs.3 crores in two parts was given on 31.03.2011 by a transfer entry in the Indian Overseas Bank account of Dhanalakhsmi Agencies.”, adding to its observation the ITAT said.
Subsequently, the ITAT members commented:
“We note that it was repaid on 15.04.2011 again through the same bank. The assessee filed confirmation before CIT(A) and the relevant ledger extracts. The CIT(A) noted that although the amount has been confirmed, paid and received through banking channel but he has not accepted the claim of the assessee.”
Thus finally allowing the assessee’s appeal in part, the Chennai ITAT concluded :
“At this stage, when pointed out to ld.counsel, whether he want to file the details before AO to prove the creditor, he undertook to file complete details and to produce whatever evidence the AO wants in regard to this. On this, the ld.CIT-DR has not objected. Hence, in view of the concession given by both the sides, we remit this issue back to the file of the AO, who will examine the creditor and then will decide accordingly.”
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