The genuineness of the agreements cannot be doubted without any material in hand: Bangalore ITAT.  

The issue was of Addition u/s 68 as Unexplained cash deposits.

Provision to section 68 inserted w.e.f. 1.4.2013 requires the assessee to prove the source of source.

This proviso shall apply to funds collected by a closely held company from resident shareholders.

It was pleaded that the same will not be applicable to the assessee as she is an individual.

ITAT held as under:

We have carefully gone through this entry in the bank statement on this date, which shows the withdrawal of ₹ 1 crore vide Cheque No.3564 on 13.7.2012. However, the AO has mistaken it as a deposit of ₹ 1 crore.

 Section 68 cannot be applied for withdrawal made from the bank account.

It is not a case of unexplained deposit so as to sustain the addition u/s. 68 of the Act. Accordingly, the addition of ₹ 1 crore is deleted.

AO cannot by merely rejecting a reasonably good explanation by converting it as no proof. In our opinion, the explanation offered by the assessee was reasonable and genuine explanation cannot be rejected by the AO without any cogent material.

In the present case, the AO wants the assessee to prove the source of the source of credits which is not required u/s. 68 in the case of these kind of credits.

Primarily the assessee has established the source of credit that she has received from her husband and also brought on record that the assessee’s husband is having vast agricultural lands.

The owning of agricultural lands by the assessee’s spouse is not at all doubted by the AO.

It is also brought on record by the assessee that she is also owning agricultural land and entered into a sale deed in favour of M/s. Dreamz Infra India Pvt. Ltd. on 05.9.2012 in respect of converted property bearing Survey No.121/3 (Old No.121/1) measuring 1 acre 10 guntas at Boganahali Village, Varthur Hobli, Bangalore East Taluk for a consideration of ₹ 3,20,00,000.

The genuineness of the assessee’s spouse entered into sale agreements with various parties cannot be doubted without any material in hand.

Provision to section 68 inserted w.e.f. 1.4.2013 requires the assessee to prove the source of source. This proviso shall apply to funds collected by a closely held company from resident shareholders. Hence the same will not be applicable to the assessee as she is an individual.In our opinion, the assessee discharged the burden cast upon her to explain the identity of parties, capacity and genuineness of the transaction. Accordingly, this addition is deleted.

As the assessee has explained that ₹ 28 lakhs has been deposited into the bank account out of the advance of ₹ 50 lakhs received from N. Gopalaiah. The AO accepted the advance of ₹ 50 lakhs received from N. Gopalaiah, but he has doubted the deposit of ₹ 28 lakhs out of advance of ₹ 50 lakhs into the assessee’s bank account. We find that ₹ 50 lakhs received from N. Gopalaiah as advance by the assessee’s husband is available to the assessee to deposit ₹ 28 lakhs in the bank account. The AO has not doubted the receipt of ₹ 50 lakhs by the assessee’s spouse from N. Gopalaiah. The source is explained. Hence, we delete this addition.

Appeal of assessee allowed.