Introduction: The taxation landscape is replete with complexities and nuances. The case of Manjeet Singh vs. ITO, as decided by the ITAT Chandigarh, is one such testament. At the heart of this case lies the contention surrounding unexplained cash deposits and whether they stand validated when the assessee explains the source.
Background of the Case: Manjeet Singh, the assessee, contested an addition of Rs. 23 lacs out of a total addition of Rs. 43 lacs made by the Assessing Officer (AO). The AO identified a cash deposit of Rs. 43 lacs in Singh’s bank account. Given the absence of a satisfactory explanation about this deposit’s origin, the AO viewed this sum as an unexplained income.
Sale Deed as Evidence: During the appellate proceedings, Singh presented a Sale Deed dated 23.05.2006. This document indicated that Singh, along with his brothers Balwinder and Lakhwinder, had sold their joint land for Rs. 60 lacs. Singh argued that the bank deposits originated from this land sale’s proceeds.
The Commissioner of Income Tax (Appeals) Verdict: The CIT(A) considered the Sale Deed evidence and calculated Singh’s share of the joint land as one-third. This calculation led the CIT(A) to delete an addition amounting to Rs. 20 lacs. However, the remaining Rs. 23 lacs was confirmed as an addition since Singh did not produce any confirmation from his brothers about the sale proceeds deposited in his account.
The Special Circumstance: Police Custody During the case’s progression, it was revealed that Singh’s brothers were in police custody from July 2006 onwards. Given this situation, they could not provide immediate confirmations regarding the deposit in Singh’s account. However, affidavits from both brothers later confirmed that their sale consideration share was indeed deposited in Singh’s account due to the special circumstances.
ITAT Chandigarh’s Verdict: Taking into account the presented evidence and circumstances, the Tribunal confirmed that the joint land was sold by Singh and his brothers for Rs. 60 lacs. Given the brothers’ police custody situation and their affidavits, the Tribunal concluded that the source of the cash deposits was adequately explained. Thus, the additions made by the lower authorities were deemed non-sustainable and ordered for deletion.
Conclusion: The case of Manjeet Singh vs. ITO serves as a vivid reminder of the intricacies within the taxation domain. It emphasizes the importance of understanding the context, considering exceptional circumstances, and relying on evidence when drawing conclusions. The ITAT Chandigarh’s ruling underscores the need for a judicious approach in taxation matters, especially when significant sums and reputations are at stake.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. The present appeal has been preferred by the assess ee against the order dated 14.06.2019 of the Commissioner of Income Tax (Appeals)-4, Ludhiana [in short ‘ the CIT(A)’] pertaining to 2007-08 assessment year.
2. The assess ee in this appeal has contested the confirmation of addition of Rs. 23 lac s out of total addition of Rs.43 lac s made by the Assessing Officer (in short ‘the AO’).
3. The brief facts of the case are that the AO found that there was a cash deposit of Rs.43 lacs in the bank account of the assessee. As the assessee did not furnish satisfactory explanation regarding the source of deposit, the AO made the addition of the aforesaid amount of Rs.43 lacs as unexplained income of the assessee.
4. During the appellate proceedings, the assessee furnished additional evidences in the form of Sale Deed dated 23.05.2006 pleading that the assessee alongwith his brothers Shri Balwinder Singh and Shri Lakhwinder Singh had sold their jointly owned land for Rs.60 lacs and that the bank deposits were out of the sale proceeds of the land sold by them. The ld. CIT(A) called for a remand report in respect of the evidences furnished by the assessee from the AO. The ld. CIT(A) held that the assessee’s share in the said joint land was 1/3r d, therefore, he deleted the addition of 1/3r d of the sale amount amounting to Rs.20 lacs., however, he confirmed the addition of the remaining amount of Rs.23 lacs observing that the assessee had failed to file confirmation from his brothers that the sale proceeds of their parts were also deposited in assessee’s account.
5. The ld. Counsel for the assessee, before us has submitted that both the brothers of the assessee were in police custody from the month of July,2006. The ld. CIT(A) has also taken note of the order of the Sessions Judge dated 23.10.2016 in this respect. The ld. Counsel for the assessee has further submitted that since his brothers were in jail, therefore, the confirmations from his brothers could not be filed before the ld. CIT(A), however, the facts were that since his brothers were in custody, therefore, their part of sale consideration was deposited, with their consent, in assessee’s account. The ld. counsel has also placed reliance upon the affidavits of Shri Balwinder Singh and Shri Lakhwinder Singh, copies of which have been placed at page 18-19 of the Paper Book, whereby they have confirmed that their part of sale consideration was deposited into the Saving Bank Account of the assessee and that the source of deposit was out of the sale proceeds of the said land.
6. Considering the above submissions alongwith the evidences furnished, it is proved on record that the joint land was sold on 23.05.2006 by the assessee and his brothers for an amount of Rs.60 lacs. Further, that both the brothers of the assessee were in police custody from the month of July,2006. Both of the brothers have confirmed that their share of sale consideration was deposited, under the circumstances, in assessee’s account. In view of this, the source of the cash deposits stood explained. The additions made/confirmed by the lower authorities being not sustainable are hereby ordered to be deleted.
7. In the result, appeal of the assessee stands allowed. Order pronounced in the Open Court on 21s t July, 2023.