2012 (12) TMI 447 - AT - Income Tax

Addition on account of undisclosed sources of income Assessee was director of the sick companies (BIFR) and there was a possibility to attached the personal bank accounts of directors for recovery Assessee withdraw the cash from bank & kept in the house and deposit the same cash in caving bank account after seven months - Held that - Assessee has duly explained the source of deposits in the bank account, being the withdrawal made from the bank. The AO has also not given any finding that the said amount as withdrawn from the bank by the assessee was utilised for any other purposes, then re-deposited in the bank account. There was a genuine apprehension of attachment of the assessee s account in the process of recovery by the banks against sick companies and in that course assessee withdraw the cash. Appeal decides in favour of assessee

Summary

Issues involved:
1. Treatment of redeposit of cash on hand in bank account as undisclosed source of income.
2. Applicability of one time settlement process and fear of attachment.
3. Rejection of explanation by Assessing Officer and CIT(A).
4. Consideration of genuine apprehension of attachment of account.
5. Comparison with similar cases and legal precedent.

Issue 1: Treatment of redeposit of cash on hand in bank account as undisclosed source of income:
The appeal centered on the Assessing Officer's treatment of a cash redeposit of 15 lakhs in a bank account as an undisclosed source of income. The appellant argued that the cash was withdrawn due to recovery proceedings against a sick company where they held a position, and redeposited after settlement. The Assessing Officer rejected this explanation, leading to the appeal.

Issue 2: Applicability of one time settlement process and fear of attachment:
The appellant contended that the one time settlement process was lengthy, and the fear of attachment was genuine due to the recovery proceedings against the sick company. The Assessing Officer and CIT(A) were criticized for not considering these circumstances adequately.

Issue 3: Rejection of explanation by Assessing Officer and CIT(A):
The Assessing Officer and CIT(A) rejected the appellant's explanation regarding the cash deposits, emphasizing the unlikelihood of keeping the money in the house for seven months. The appellant's explanation was deemed unbelievable, leading to the confirmation of the addition as undisclosed income.

Issue 4: Consideration of genuine apprehension of attachment of account:
The Tribunal analyzed the genuine apprehension of attachment of the appellant's account during the recovery process against the sick company. The Tribunal found that the appellant had withdrawn the cash to prevent attachment, which was a reasonable course of action given the circumstances.

Issue 5: Comparison with similar cases and legal precedent:
The Tribunal referred to a similar case decided by the Delhi Benches, highlighting that when there is a sufficient cash withdrawal to explain the source of deposit, the explanation should not be rejected. Relying on this legal precedent, the Tribunal concluded that the appellant had adequately explained the source of the deposits, leading to the deletion of the addition made by the authorities.

In conclusion, the Tribunal allowed the appeal, emphasizing that the appellant had satisfactorily explained the source of the deposits, which were withdrawn due to genuine apprehension of attachment during recovery proceedings against the sick company. The Tribunal's decision aligned with legal precedent and highlighted the importance of considering all relevant circumstances before treating deposits as undisclosed income.