2014 (1) TMI 334 - AT - Income Tax

Unexplained cash credit - Held that - The assessee has furnished the date-wise cash balance and each and every deposit in the bank account is shown to be out of the cash balance with the assessee - The opening cash balance as per the cash account is Rs. 9,13,080/- and the closing cash balance of the year is Rs. 12,50,983 - The same is duly reflected in the balance sheet ended on 31st March, 2007 and 31st March, 2008 respectively - When in the electronic filing of the return there is no provision for filing of the balance sheet, then non-furnishing of the balance sheet cannot lead to the presumption that there was no cash in hand with the assessee - The assessee is a professional whose returned income is more than Rs. 18 lakhs - The inference of the Assessing Officer that the amount withdrawn by the assessee from the bank has been utilized for household expenditure or other expenses is without any basis - The total withdrawal by the assessee is more than Rs. 44 lakhs and in the absence of any material to presume that such huge cash withdrawal has been spent by the assessee would be incorrect - Some of the withdrawals are of huge amount, say, Rs. 7,00,000/-, 10,50,000/- (Rs. 4,90,000 Rs. 5,60,000) - To presume such huge withdrawal was spent by the assessee in the absence of any evidence of its utilization would be a wrong presumption The Tribunal is of the opinion that the entire cash deposit in the bank is duly explained by the assessee Decided against Revenue.

Summary

Issues:
1. Appeal by Revenue against CIT(A) order for AY 2008-09.
2. Revenue's ground: Discrepancy in cash deposits and withdrawals.
3. Assessee's grounds: Unexplained cash deposits, jurisdictional errors.
4. Dispute over cash deposits in bank account.
5. Balance sheet submission and electronic filing challenges.
6. Arguments on source of cash deposits and withdrawals.
7. Tribunal's analysis and decision on the case.

Issue 1: Appeal by Revenue against CIT(A) order for AY 2008-09
The Revenue appealed against the CIT(A) order for the assessment year 2008-09. The primary contention was the discrepancy between the cash deposits and withdrawals in the assessee's bank account, leading to unexplained credits under Section 68 of the Income Tax Act, 1961.

Issue 2: Revenue's ground - Discrepancy in cash deposits and withdrawals
The Revenue contended that the CIT(A) erred in restricting the addition of Rs. 8,45,000 under Section 68, despite the initial addition of Rs. 26,30,000 by the Assessing Officer. The Revenue argued that the assessee failed to establish a clear nexus between cash withdrawals and subsequent bank deposits, indicating a lack of explanation for the source of funds.

Issue 3: Assessee's grounds - Unexplained cash deposits, jurisdictional errors
The assessee raised concerns regarding the sustained addition of Rs. 8,45,000 for unexplained cash deposits in the bank account on specific dates, challenging the CIT(A)'s decision. The assessee also highlighted jurisdictional errors, alleging that the assessing officer's order lacked legal basis, equity, and proper consideration of facts and evidence.

Issue 4: Dispute over cash deposits in bank account
The case involved an individual deriving income from consultancy, with the assessing officer questioning cash deposits of Rs. 26,30,000 in the Axis Bank account. The assessing officer rejected the explanation provided by the assessee, leading to the addition of the entire amount as unexplained credit under Section 68.

Issue 5: Balance sheet submission and electronic filing challenges
The assessee faced challenges in submitting balance sheets due to electronic filing constraints, preventing the disclosure of assets like cash in hand. However, the assessee maintained regular books of account, with the balance sheet details for the relevant years reflecting the opening and closing cash balances.

Issue 6: Arguments on source of cash deposits and withdrawals
The Revenue argued that the cash deposits lacked a specific explained source, suggesting that the withdrawn amounts were likely used for personal or household expenses. In contrast, the assessee maintained that the deposits were from the opening cash balance and were duly supported by the cash flow details.

Issue 7: Tribunal's analysis and decision on the case
After considering both parties' arguments and the evidence presented, the Tribunal found the assessee's explanation for the cash deposits credible. The Tribunal noted that the opening cash balance adequately covered the deposits made on specific dates, and the withdrawals exceeded the total deposits, negating the Revenue's presumption of unexplained spending. Consequently, the Tribunal ruled in favor of the assessee, deleting the addition of Rs. 8,45,000 and dismissing the Revenue's appeal.

This detailed analysis highlights the key legal and factual aspects of the judgment, encompassing the issues raised by both parties and the Tribunal's decision based on the presented evidence and legal interpretations.