2015 (3) TMI 1207 - AT - Income Tax

Addition towards unexplained cash deposits in bank - income from undisclosed sources - Held that - We have seen a copy of the bank account maintained by the assessee with ICICI Bank Ltd. from which it is apparent that there are several items of deposits and withdrawals. The Assessing Officer has simply picked up the deposit side of the pass-book and made the addition for all the deposits made in the bank accounts ignoring that there are several withdrawals also. This course of action adopted by the Assessing Officer in making the addition for all the deposit entries in the bank accounts has no sanction of law. If there are certain deposits and withdrawals as well and there is nothing in the assessment order to co-relate these withdrawals with any investments made by the assessee the presumption is that such withdrawals were utilized for making deposits. In such circumstances the making of addition to the extent of peak credit is a more rational way rather than all the deposit entries. We therefore set aside the impugned order on this score and send the matter to the file of Assessing Officer for making an addition for an amount equal to peak balance in these bank accounts. Needless to say the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Confirmation of addition of unexplained cash deposits in bank as income from undisclosed sources.

Analysis:
The appeal arose from an order by the CIT(A) related to the assessment year 2009-10, where the only issue was the addition of Rs. 45,50,775 towards unexplained cash deposits in bank accounts. The Assessing Officer had found that the assessee deposited Rs. 34,65,775 in ICICI Bank Ltd. and Rs. 10,85,000 in HDFC Bank Ltd. The assessment was concluded under Section 144 of the Income-tax Act, 1961, as the assessee did not participate in the proceedings. The CIT(A) requested a remand report on additional evidence submitted by the assessee, and after considering the facts, sustained the addition. The assessee contested this addition.

During the appeal, the assessee argued that withdrawals from the bank accounts were the source of the deposits. The ITAT observed that the Assessing Officer had only considered the deposit side of the pass-book and made the addition for all deposits, ignoring the withdrawals. This approach lacked legal basis. The ITAT stated that if there were both deposits and withdrawals, without evidence linking withdrawals to investments, the presumption was that withdrawals were used for deposits. Therefore, the ITAT set aside the order and directed the Assessing Officer to make an addition equal to the peak balance in the bank accounts. The assessee would have a chance to present their case in the fresh proceedings.

Ultimately, the appeal was allowed for statistical purposes, and the decision was pronounced on 27th March 2015.