2014 (1) TMI 185 - AT - Income Tax

Unexplained deposits u/s 69A - Held that - when the assessee claims that he has withdrawn the amount on earlier occasion and the same was kept with him for some time and later it was deposited into the bank account, it is the duty of the assessee to establish the same - The assessee has failed to establish nexus between the earlier withdrawal from the bank account and deposited the same into the account - The issue was restored for fresh adjudication.

Summary

Issues:
Assessment of unexplained cash deposits in bank accounts.

Analysis:
The appeal was filed against the Order of the CIT(A)-III, Hyderabad for the assessment year 2009-2010. The assessee derived income from various sources, including salary, short term capital gain, and income from other sources. The Assessing Officer made additions to the total income, including short term capital gain and unexplained cash deposits. The deposits made in banks were thoroughly investigated, and all were added back during the assessment proceedings except for the addition related to cash deposits made in Cosmos Bank, which the assessee contested. The Assessing Officer treated the unexplained cash deposits as income under section 69A of the Income Tax Act due to the failure of the assessee to provide satisfactory explanations for the sources of the deposits.

During the appellate proceedings, the CIT(A) carefully examined the bank account details provided by the assessee. The CIT(A) observed an opening balance and analyzed the dates of withdrawals and deposits. While some withdrawals and deposits were close in terms of dates, others were weeks apart, leading to a partial allowance of the appeal. The CIT(A) concluded that the assessee failed to conclusively explain the circulation of money in certain instances, confirming a balance addition of Rs.10.82 lakhs.

In the subsequent appeal before the ITAT Hyderabad, the assessee's counsel argued that the cash withdrawals and deposits were related, citing reasons such as health emergencies requiring cash on hand. The counsel also relied on legal precedents to support the argument that the cash in hand was presumed to be re-deposited in the bank account for specific purposes.

The ITAT Hyderabad considered the arguments from both parties and emphasized the need for the assessee to establish a clear link between the earlier cash withdrawals and subsequent deposits into the bank account. As the live link between the withdrawals and deposits was not adequately demonstrated, the ITAT remitted the issue back to the Assessing Officer for fresh consideration. The appeal of the assessee was allowed for statistical purposes, indicating a procedural victory without altering the tax liability.

In conclusion, the judgment highlighted the importance of providing concrete evidence to substantiate claims regarding cash transactions, especially when faced with unexplained cash deposits. The burden of proof rests on the assessee to establish a direct connection between cash withdrawals and subsequent bank deposits to avoid adverse tax implications.