2024 (3) TMI 1431 - AT - Income Tax

Unexplained income u/s 69A - amount of introduction of the capital account in the hands of the assessee and another small amount of disallowance - HELD THAT - When the assessee confronted about the source of the money credited in the capital account. The assessee submitted that he has on 27th March 2027 transferred a sum of Rs. 18, 00, 000/- from his saving bank account No. 43280100000261 and Rs. 45, 000/- was introduced out of cash balance arising from the agricultural activities. AO did not find any substance in the contentions of the assessee and therefore the said amount was added as income of the assessee. Assessee referring to capital account of the audited accounts being the bank book of his proprietary concern Krishna Agri Genetics and assessee s saving bank account and maintained with the Bank of Baroda from where the assessee has transferred from his saving bank account to the current year maintained by the assessee in proprietary concern explained that the source is coming from the same bank account and credit of which is examined by the ld. AO. The source of credit in the proprietary concern account is sourced from the saving bank account and the source of saving bank account is the proceeds of the agricultural income which the ld. CIT (A) tough added by the AO considered as genuine. CIT (A) stated that money is not from the bank cheque whereas the entries are recorded on the same date i.e. 27.03.2017. The money so sourced from that account the assessee has transferred in his business concerns thus the source is found explained and the transfer of money from one account to another cannot be considered as income of the assessee. The bench noted that the issue of addition of agricultural income has already been considered by the ld. CIT (A) while dealing with the addition made by the ld. AO wherein he deleted the addition made on account of agricultural income for Rs. 22, 01, 479/-. Considering that this aspect of the matter source of Rs. 18, 00, 000/- out of that agricultural income which is considered as genuine cannot be denied to the assessee and as regards the cash of Rs. 45, 000/- the assessee stated that it is generated from the saving bank account and activities of the agricultural income is not disputed. Even the addition of Rs. 45, 000/- does not warrant. In terms of these observations the ground No. 1 raised by the assessee is allowed. Addition due to a discrepancy in the capital account balance - As relevant fact arises from the assessment order is that on examination of capital account. AO noted that the closing balance of capital account for F.Y 2015-16 was Rs. 52, 28, 065/- but the opening the balance which the assessee carried over in the F.Y 2016-17 was Rs. 52, 44, 864/-. Thus a sum of Rs. 16, 799/- was carried over ground what is the balance in the last year. AO added that amount income of the assessee on this aspect of the matter the ld. CIT (A) did not find any merit in the contentions so raised and therefore the same was dismissed. Before us the ld. AR of the assessee did not demonstrated before us by filing any cogent evidence so as to take a different view then what has been taken by the lower authorities. In terms of these observations we do not find any merit and therefore the addition of Rs. 16, 800/- is confirmed. Based on these observations the ground No. 2 raised by the assessee is dismissed. Appeal of the assessee is partly allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the addition of Rs. 18,45,000/- to the assessee's income as unexplained under Section 69A of the Income Tax Act was justified.
• Whether the addition of Rs. 16,800/- due to a discrepancy in the capital account balance was correct.
• The applicability of Section 115BBE concerning the tax rate on unexplained income.

ISSUE-WISE DETAILED ANALYSIS

1. Addition of Rs. 18,45,000/- as Unexplained Income

• Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, where the source of income is not satisfactorily explained by the assessee. The applicability of Section 115BBE, which imposes a higher tax rate on unexplained income, was also considered.
• Court's Interpretation and Reasoning: The Tribunal noted that the assessee claimed the amount was transferred from his savings account to his business account, and this was part of his agricultural income. The Tribunal found that the source of Rs. 18,00,000/- was satisfactorily explained as it was transferred from a savings account where agricultural income was credited. The remaining Rs. 45,000/- was also justified as originating from agricultural activities.
• Key Evidence and Findings: The Tribunal examined the bank statements and capital accounts provided by the assessee, which demonstrated the transfer of funds from the savings account to the business account. The agricultural income had already been accepted by the CIT (A), which supported the assessee's claim.
• Application of Law to Facts: Given the evidence of the transfer and the acceptance of agricultural income, the Tribunal concluded that the addition of Rs. 18,45,000/- as unexplained income was not warranted.
• Treatment of Competing Arguments: The Tribunal considered the arguments of the Revenue but found them unconvincing in light of the evidence provided by the assessee.
• Conclusions: The Tribunal allowed the ground raised by the assessee, directing the deletion of the addition of Rs. 18,45,000/-.

2. Addition of Rs. 16,800/- Due to Discrepancy in Capital Account

• Relevant Legal Framework and Precedents: Section 69A was again applicable here, concerning unexplained discrepancies in financial statements.
• Court's Interpretation and Reasoning: The Tribunal noted the discrepancy between the closing balance of the previous year and the opening balance of the current year, which was not satisfactorily explained by the assessee.
• Key Evidence and Findings: The assessee claimed a clerical error related to transportation expenses, but failed to provide sufficient evidence to support this claim.
• Application of Law to Facts: The Tribunal found that the discrepancy was not adequately justified, thus supporting the addition made by the AO.
• Treatment of Competing Arguments: The Tribunal considered the assessee's explanation but found it lacking in evidentiary support.
• Conclusions: The Tribunal upheld the addition of Rs. 16,800/- as unexplained income.

3. Applicability of Section 115BBE

• Relevant Legal Framework and Precedents: Section 115BBE imposes a higher tax rate on income deemed unexplained under sections like 68, 69, etc.
• Court's Interpretation and Reasoning: The Tribunal noted that since the addition of Rs. 18,45,000/- was deleted, the applicability of Section 115BBE to this amount was moot. However, for the Rs. 16,800/-, the section remained applicable.
• Key Evidence and Findings: The Tribunal relied on the findings related to the deletion of the Rs. 18,45,000/- addition and the sustenance of the Rs. 16,800/- addition.
• Application of Law to Facts: The Tribunal determined that Section 115BBE was not applicable to the Rs. 18,45,000/- but was applicable to the Rs. 16,800/-.
• Treatment of Competing Arguments: The Tribunal considered the arguments regarding the retrospective application of Section 115BBE but found them irrelevant to the sustained addition.
• Conclusions: The Tribunal concluded that Section 115BBE was not applicable to the deleted addition but remained applicable to the sustained addition.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal reinforced the principle that unexplained income must be satisfactorily explained with evidence, and mere transfers between accounts do not constitute unexplained income if adequately documented.
• Final Determinations on Each Issue: The Tribunal directed the deletion of the Rs. 18,45,000/- addition, upheld the Rs. 16,800/- addition, and clarified the applicability of Section 115BBE accordingly.