JR Modi Associates Ltd. Vs DCIT (ITAT Delhi)
The Assessing Officer treated ₹45 lakh received by the assessee as unexplained cash credit under section 68, alleging lack of genuineness and creditworthiness because the amount was received in cash as advance against sale of property and the original property deal was later cancelled. The CIT(A) upheld the addition, doubting the transaction since neither the original nor the subsequent property transfer ultimately materialised and 90% of the consideration was allegedly paid in cash without banking trail.
The Tribunal deleted the addition after examining the complete documentary trail. It noted that the assessee had executed a valid agreement to sell with the buyer, recorded the advance in its audited books, and produced PAN, confirmations and agreements. Subsequently, through a registered tripartite agreement, the original deal was cancelled and the same ₹45 lakh advance was endorsed and adjusted against an independent property purchase by the buyer from a third-party developer, to whom the assessee already had business receivables. Thus, the amount was merely re-routed/adjusted between independent parties and not income of the assessee.
Both the original payer (through his legal heir, as he had expired) and the third-party developer responded to section 133(6) notices and fully confirmed the transactions with supporting ledgers, agreements, bank statements and financials. The Tribunal held that once the identity of parties, source of funds and transactional linkage were independently verified by the AO himself, suspicion arising from cash mode or later non-completion of property transfers could not justify addition under section 68. The assessee had no control over whether the buyer ultimately completed purchase from the third party, and after the tripartite adjustment it had no further dealing with the buyer.
Accordingly, the Tribunal held that genuineness and creditworthiness stood proved and the advance could not be taxed as unexplained cash credit. The addition of ₹45 lakh was deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal filed by the assessee is against order dated 09.08.2023 of Learned Commissioner of Income Tax (Appeals)-29, New Delhi [hereinafter referred to as ‘Ld. CIT(A)] under Section 250 of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of assessment order dated 25.12.2018 of Learned Assessing Officer/Deputy Commissioner of Income Tax, Circle 13(1), New Delhi (hereinafter referred to as “Ld. AO”) passed under section 143(3) of the Act for assessment year 2016-17.
