2015 (3) TMI 1236 - AT - Income Tax

Unexplained cash credit - addition on cash deposits - Held that - There is nothing on record to show that the amount of ₹ 13 lakhs withdrawn by the assessee on 17.12.2008 was used for some other purpose. In our opinion, the said withdrawal having been made by the assessee just before a week i.e. on 17.12.2008, the same can reasonably be treated as available with the assessee for cash deposit of ₹ 21 lakhs made on 24.12.2008 especially when there is nothing to show that the amount of ₹ 13 lakhs withdrawn on 17.12.2008 was utilized by the assessee for some other purpose. We, therefore, treat the cash deposit of ₹ 21 lakhs made by the assessee in the bank account on 24.12.2008 as explained to the extent of ₹ 13 lakhs and sustain the addition made by the A.O. and confirmed by the Ld. CIT(A) on this issue to the extent of ₹ 8 lakhs. - Decided partly in favour of assessee

Summary

Issues:
- Addition of cash deposit as unexplained cash credit in the bank account
- Acceptability of explanation for cash deposits
- Treatment of cash withdrawals as a legitimate source for cash deposits

Analysis:
- The judgment pertains to an appeal filed by an individual assessee against the addition of Rs. 21 lakhs as unexplained cash credit in the bank account. The assessee, engaged in a retail business, declared a total income of Rs. 1,60,490 for the relevant year. The Assessing Officer (A.O.) found cash deposits totaling Rs. 33,75,000 in the bank account, out of which Rs. 21 lakhs were treated as unexplained. The A.O. did not accept the explanation provided by the assessee, leading to the addition in the total income.

- The appeal was made to the Ld. CIT(A), where the assessee reiterated the explanation for the cash deposit of Rs. 21 lakhs, attributing it to cash withdrawals from the same account and sale proceeds from the business. However, the Ld. CIT(A) upheld the addition based on the lack of correlation between the withdrawals and deposits. The CIT(A) highlighted the repeated withdrawals and subsequent deposits, questioning the necessity for such transactions and the failure to utilize the withdrawn amounts for business or personal expenses.

- The Tribunal considered the arguments from both sides and examined the material on record. The assessee's counsel argued that the cash deposit of Rs. 21 lakhs was sourced from the Rs. 13 lakhs withdrawn a week earlier. The Tribunal found merit in this argument, noting that the Rs. 13 lakhs withdrawn on 17.12.2008 could reasonably be considered the source for the deposit made on 24.12.2008. As there was no evidence to suggest the utilization of the withdrawn amount for other purposes, the Tribunal accepted the explanation to the extent of Rs. 13 lakhs, sustaining the addition of Rs. 8 lakhs. The appeal was partly allowed, acknowledging the legitimate source for a portion of the cash deposit.

Conclusion:
The judgment addresses the issue of unexplained cash credit in the bank account, emphasizing the importance of establishing a clear correlation between cash deposits and withdrawals. The Tribunal's decision underscores the need for substantiated explanations and logical connections between financial transactions to avoid additions to the total income.