2014 (12) TMI 1151 - AT - Income Tax

Unexplained deposits in the bank accounts - CIT(A) deleted the addition - Held that - On perusal of the order passed by ld. CIT(A) it appears that CIT(A) has accepted assessee s claim merely on its face value without properly making any enquiry to find out whether assessee s claim is correct. Further CIT(A) is under misconception that AO has only considered the deposits without taking into account the withdrawals. As can be seen from the assessment order AO has considered both the deposits and withdrawals and worked out the peak credit of 31, 13, 502 for the purpose of addition. In these circumstances ld. CIT(A) s finding is not sustainable. However fact remains that AO has also not properly appreciated the facts and could not make effective enquiry due to constraint of time as assessment was getting time barred. Thus the entire issue relating to deposits into assessee s bank account requires examination afresh in view of the claim made by assessee before the first appellate authority. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
- Addition of unexplained deposits in bank accounts for assessment year 2009-10.

Analysis:
1. The Department appealed against the order of the ld. CIT(A) deleting the addition of Rs. 31,13,502 made by the AO on account of unexplained deposits in the bank accounts.

2. The assessee, an individual, had made significant cash deposits in bank accounts, which the AO treated as unexplained income and added to the assessment. The assessee claimed that the deposits were related to financial transactions carried out on behalf of another individual, Mr. K. Lokadri, who had authorized the assessee to handle his business transactions through the assessee's bank account.

3. The ld. CIT(A) considered the submissions and evidence provided by the assessee, including a memorandum of understanding, news clippings about Mr. K. Lokadri's disappearance, and statements from relevant individuals. The ld. CIT(A) concluded that the deposits were part of legitimate business transactions and deleted the addition made by the AO.

4. The Department argued that the ld. CIT(A) should not have accepted the assessee's claim without proper supporting evidence and without affording an opportunity to the AO to verify the new evidence presented during the appeal.

5. The Tribunal observed that while the AO had not properly substantiated the addition with evidence, the ld. CIT(A) had accepted the assessee's claim without conducting a thorough investigation. The Tribunal directed the AO to re-examine the issue, conduct necessary inquiries with the assessee, relevant individuals, and the bank, and make a decision based on a comprehensive assessment of the facts and evidence presented.

6. The Tribunal allowed the Department's appeal for statistical purposes, emphasizing the need for a fresh examination of the deposits in the assessee's bank account to determine their legitimacy and relation to Mr. K. Lokadri's business activities.

7. The judgment highlighted the importance of conducting a detailed inquiry to establish the source and purpose of the deposits and withdrawals in the bank accounts, ensuring a fair and thorough assessment of the situation before making any additions to the assessee's income.

This comprehensive analysis outlines the key points and decisions made in the legal judgment regarding the addition of unexplained deposits in the bank accounts for the specified assessment year.