INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Cash deposit in bank account - Cash deposit being contemporaneous to transaction of sale of land entered into by assessee

AO found that assessee made cash deposit of Rs. 27,50,000 in his bank account. Accordingly, he asked the assessee to file explanation regarding the source of cash deposit but there was no response from the assessee. Therefore, the AO made addition of the same. Before CIT (A), the assessee explained the source of the cash deposit as sale proceeds of land, which was sold jointly by the assessee along with other co-owners, who were all family members and the entire sale consideration was deposited in the bank account of the assessee. CIT (A) found that as per sale deed, the sale consideration of the land sold by the assessee was shown as Rs. 6,45,000 only and not Rs. 27,50,000 as claimed by the assessee. Accordingly, CIT(A) restricted the addition to Rs. 21,05,000 after giving the credit of Rs. 6,45,000. Held: It was found that cash was deposited by assessee on the very next day of the date of sale deed, which prima facie showed that the source of cash deposit had a direct nexus with the sale transaction of the land sold by the assessee jointly with other co-owners. Further, though the sale deed showed the sale consideration, which was also the Stamp Duty Valuation however, since the assessee had brought on record the relevant facts as well as nexus between transaction of sale and deposit in bank account then only inference could be drawn that the source of deposit of Rs. 27,50,000 was the sale consideration of the land. Further, AO did not bring any contrary material against the explanation of the assessee regarding the source of the cash deposit made in the bank account. Therefore, as deposit of cash in bank account was contemporaneous to the transaction of sale of land then in absence of any contrary material, the source explained by the assessee could not be rejected. Hence, the addition sustained by CIT(A) was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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