INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Cash deposit in bank account explained to be made out of earnest money received against sale of agricultural land - AO disputed 11 months for getting sale deed registered after date of agreement to sell as unreasonably long period

AO noticed deposit of Rs. 40 lakhs in assessee's bank account. Assessee explained the same to be earnest received money against sale of agricultural land. AO considered time lag, of 11 months for getting sale deed registered after date of agreement to sell as unreasonably long period and required assessee to furnish copies of returns filed by purchasers. Assessee failed to do so, AO treated earnest money as unexplained credit and made addition under section 68. Assessee contended that purchasers did not have the entire funds available in cash and they were required to liquidify their assets by sale of agricultural land and raising loans from their relatives, etc., and the fact that ultimately despite their best efforts and attempts of parties after extending the date a few times, ultimately funds could not be raised. Held: So the tax authorities to conclude that 11 months time lag was not a normal time, no facts or reasoning had been brought on record no evidence has been placed on record by AO to discard plethora of evidence by way of documents, Compromise Deed before Panchayat and statements of purchasers, etc. Similarly ownership of sufficient land to justify contemplated purchase had remained unrebutted. The insistence that there was no returned income ignoring the fact that largely it was agricultural income earned from agricultural land and related activities which purchasers had placed on record was not correct. Accordingly, assessee had more than adequately explained sources of deposits in his account and, therefore, addition under section 68 could not be sustained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17

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