2016 (10) TMI 1066 - AT - Income Tax

Unexplained cash deposits - Held that - The conduct of the assessee is full of lapses and latches; and lacks bona fides. The original return was deliberately filed with inaccurate particulars. When the AO confronted the AIR information, the assessee cooked up a story to cover-up the gaps and claiming that the deposits in the bank account were made out of earlier withdrawals. In such suspicious circumstances, the burden of explaining the entries of transactions, as contended, squarely lies on the assessee as all the relevant facts are within her knowledge. Since the assessee failed to discharge her burden in effective terms, the IT Authorities are justified in drawing suitable inference. - Decided against assessee.

Summary

Issues:
Challenging addition of unexplained bank deposits as income from other sources.

Analysis:
The assessee filed a return of income showing profit under section 44AF but failed to disclose share trading business. The Assessing Officer found unexplained cash deposits in the Axis Bank account, leading to suspicion. The AO rejected the alleged business story based on various discrepancies, drawing adverse inference as per the Sumati Dayal case. The first appeal upheld the addition, citing similar judgments. The second appeal raised arguments on the reliability of books of accounts and cited a Gujarat High Court judgment. The Department argued that the undisclosed share trading business and suspicious conduct warranted the addition. The ITAT upheld the addition, emphasizing the assessee's failure to explain transactions satisfactorily, leading to justifiable adverse inference, in line with the Sumati Dayal judgment. The ITAT dismissed the appeal, highlighting the lapses in the assessee's conduct and the lack of bona fides in explanations. The decision was based on the assessee's failure to discharge the burden of proof effectively, justifying the addition of unexplained bank deposits as income from other sources.

This comprehensive analysis covers the issues raised in the judgment, detailing the arguments presented by both sides and the reasoning behind the final decision.