The Income Tax Appellate Tribunal (ITAT) Mumbai had ruled that that if a registered sale deed, which serves as a primary legal document, shows cash receipts from a property sale and bank statements confirm the deposit of that cash, then the source of the cash is fully accounted for, meaning it can’t be classified as unexplained cash credit.
The income tax department had received tips that a lady had sold a property for Rs 94.06 lakh and deposited Rs 13 lakh out of Rs 38 lakh cash in her ICICI Bank account. Since she hadn’t filed an income tax return (ITR) under Section 139, the income tax Assessing Officer decided to reopen the assessment by issuing a notice under Section 148 on April 28, 2022, after following the necessary procedures outlined in Section 148A.
The assessee in response, filed an ITR and furnished supporting documentary evidence including the registered sale deed, annexed receipts, bank statements and a computation explaining that Rs 38,15,000 out of the total sale consideration was received in cash.
Despite this, the AO treated the ITR as invalid due to a system-generated technical issue and disregarded the evidence furnished, ultimately treating the entire sale consideration of Rs 94,06,000 as unexplained income. The CIT(A) partly accepted the capital gains computation but upheld the addition under Section 69A relating to the cash deposits.
The case was filed in ITAT and the ITAT Mumbai examined the matter and noted that the registered sale deed clearly recorded the receipt of sale consideration, including the cash component of Rs 38,15,000.
The ITAT Mumbai held that once the primary legal document i.e. the registered sale deed confirmed the cash receipt and the bank entries supported the same, the source of the deposits stood explained.
ITAT Mumbai said: “The statutory mandate under Section 69A requires that where the explanation furnished by the assessee is supported by credible evidence and is not shown to be false, no addition is warranted. The explanation in the present case is not only consistent but stands fortified by primary documents which the revenue has not sought to impeach.”
ITAT Mumbai said: “Information obtained through automated modules such as AIMS (tax department’s internal system) may trigger enquiry but cannot override or supplant primary documentary evidence emanating from the registered instrument of transfer itself. The authorities below have thus erred in proceeding on peripheral considerations rather than adjudicating the factual merits.”
ITAT gave following judgement:
- In these circumstances, the addition of Rs 13,00,500 under Section 69A is wholly unsustainable.
- There is no material on record to suggest that the assessee possessed any source of income other than the sale consideration in question. The factual matrix overwhelmingly supports the assessee’s explanation and therefore the impugned addition is directed to be deleted.
