2014 (8) TMI 725 - AT - Income Tax

Unexplained cash deposits u/s 68 - Assessee engaged in business of DEPB licenses, commission agency and trading Held that - The assessee is disputing the addition relating to the deposits made into his bank - The assessee has explained the sources to be the sale proceeds realized on sale of shares - the assessee has sold 76850 shares to 15 persons and received cash - the assessee himself has furnished the sources only to the extent of ₹ 7,76,220/- and he did not explain the sources for the remaining amount of ₹ 20.42 lakhs - the assessee has claimed to have sold the shares off-market by receiving cash - None of the parties could furnish copies of the share certificates and share transfer forms to substantiate their respective claim the contention of the assessee is accepted that a prudent person will not buy shares which do not have any market value and the person who got rid of such kind of shares will not buy back the same from those sellers - the explanations furnished by the assessee may also be tested by considering human probabilities and human conduct - the explanations offered by the assessee with regard to sale of shares and re-purchase of shares of company which has been delisted is beyond the comprehension of human probabilities the order of the CIT(A) is upheld Decided against Assessee.

Summary

Issues:
- Delay in filing the appeal
- Addition of unexplained cash deposits under section 68 of the Income Tax Act

Delay in filing the appeal:
The appeal was filed by the assessee against the order passed by the Ld CIT(A)-31, Mumbai, which was found to be barred by limitation by 9 days. The assessee submitted a petition requesting the Bench to condone the delay, which was not objected to by the Ld D.R. Consequently, the delay was condoned, and the appeal was admitted.

Addition of unexplained cash deposits under section 68:
The assessee contested the addition of Rs. 28,18,300 made by the assessing officer under section 68 of the Income Tax Act. The assessee, engaged in various businesses, including dealing in DEPB licenses and trading, had made cash deposits in different bank accounts without providing details to explain the source of these deposits. The assessing officer treated these deposits as unexplained cash credits.

Before the Ld CIT(A), the assessee argued that the cash deposits were not unexplained cash credits under section 68 but should be considered under section 69 of the Act. The assessee claimed that the deposits were from the sale of shares in a company named M/s Orbit Polyster, supported by new evidence. The Ld CIT(A) called for a remand report from the AO, who confirmed the cash deposits and the lack of evidence regarding the sale and purchase of shares.

The Ld CIT(A) upheld the addition of Rs. 28,18,300, stating that the explanations provided by the assessee were not substantiated. The parties involved in the alleged share transactions could not provide necessary documentation, and the transactions seemed implausible. The Ld CIT(A) concluded that the cash deposits were unexplained and should be treated as unexplained cash credits under section 68.

The assessee appealed to the ITAT, reiterating the source of the cash deposits as the sale proceeds from shares. However, the ITAT found that the explanations provided by the assessee were not credible. The alleged sale and repurchase of shares in a delisted company were deemed beyond human probabilities, and the Ld CIT(A)'s decision to confirm the addition of Rs. 28,18,300 was upheld.

In conclusion, the ITAT dismissed the appeal filed by the assessee, affirming the addition of unexplained cash deposits under section 68 of the Income Tax Act.